Insights

Getting European Health Insurers on the Front Foot during COVID-19

This article was first published on April 14, 2020.

Editor's note: Oliver Wyman is monitoring the COVID events in real time and we have compiled resources to help our clients and the industries they serve. Please continue to monitor the Oliver Wyman Coronavirus hub for updates.

The COVID-19 pandemic is evolving at pace, with dramatic increases in cases and deaths across the vast majority of markets. Governments around the world are applying increasingly stringent contingency measures in an attempt to manage the inevitable pressure on the health system created by a perfect storm of reducing capacity of front-line staff, high global demand for equipment and materials, and an exponential increase in patients.

While the primary front-line response with regards to both testing and treatment in almost all markets has been led and coordinated by the public health systems, the scale of the challenges is increasingly leading to the private sector being asked to provide capacity. In the more affected markets this has led to governments mandating that all elective surgery (both public and private) be cancelled in order to free up beds for the ongoing emergency.

There is a great deal of uncertainty for the exact near-term and long-term implications for the health insurance sector and insurers are today facing immediate challenges to ensure positive outcomes for their customers, their communities and their staff. Despite these pressures and uncertainties, inaction and a lack of preparation is the worst response. We have outlined four key responses that health insurers should start facing into as the crisis evolves to get out in front of the market:

1.      Proactively engage with policyholders – don’t hide, do effectively communicate and create new positive experiences

2.      Consider the potential for longer-term shifts in customer behaviour

3.      Leverage big data to get insights on claims management post crisis

4.      Prepare for the second order implications on your provider network relationships

The purpose of this note is to share emerging views on some of the key issues arising for health insurers and our perspectives on key actions insurers should be taking in the here and now to get on the front foot during this evolving crisis.

One size does not fit all in healthcare – it is a highly localized industry, with varying demographics, market structures and policy responses from governments in each country. In setting a strategic response, it is important for an insurer to curate the details of their actions to be relevant for each market. This note won’t go into market by market specificities, but instead addresses emerging issues that apply across different market structures. For details on the background of the virus, and our broader views on impacts across healthcare and other industries, please visit our coronavirus hub.

Customers are likely to be forgiving of restrictions to their normal services at this time but much less forgiving if their healthcare insurer is not present and reaching out to support them
Fady Khayatt , Partner , Insurance

1.      Proactively engage with policyholders – don’t hide, do effectively communicate and create new positive experiences

This is a critical time for health insurers to remain relevant for their customers. It is an opportunity to evolve the relationship dynamic from the payer of claims to a true partner in health – even if that is to be a voice of reassurance reiterating public health advice. While the testing and treatment of COVID-19 cases has in most markets been led by the public sector, claims that are directly related to COVID-19 are likely to be limited in the short-term. However, there is understandable anxiety and concern amongst policyholders and a desire to be able to speak to healthcare professionals, and this has been driving an increase in demand for the broader offering from health insurers beyond claims reimbursement (e.g. telemedicine, private GPs, mental health programs etc).

In this period of heightened sensitivities, based on our own experience it seems that most insurers are not communicating proactively enough with their customers. Most online communication has focused on guiding customers to the public resources and what their policy covers (if anything) relating to the pandemic. We have seen only a few examples of insurers reaching out pro-actively to their customers and being their trusted healthcare partner. We believe that customers will value and have a positive view from insurers that they see as being present for them, putting forward service that might help, and being honest about what support they can and cannot provide at this time. Private medical insurance is often described as providing better access and choice to customers, and under the current circumstances these are being restricted for all types of interventions. Customers are likely to be forgiving of restrictions to their normal services at this time but much less forgiving if their healthcare insurer is not present and reaching out to support them. It is often said that customers see the value of insurance when they claim, we believe this is a time for insurers to show what they can do for customers and that they are there for them even in the absence of a direct claim or where a particular intervention has to be delayed.

In previous crises such as 9/11 and SARS, those insurers that went ‘above and beyond’ (e.g. by temporarily offering certain services free, suspending coverage caps, actively reaching out to HR directors and offering dedicated corporate helplines) are those that came out the other side with greater brand equity and in turn higher retention rates. In fact, anecdotal evidence suggests that insurers in Asia have responded and communicated more quickly with examples of extended coverage and outreach for support.

2.      Consider the potential for longer-term shifts in customer behavior and future demand

Behavioural psychologists have determined that it takes about 90 days for a new behavior to become automatic, and at the time of writing it seems that the containment measures may go on for longer than this. Over this period new habits are likely to form, and there is potentially an opportunity to encourage customers to engage with new technologies, such as teleconsultation and other remote practices. Such a shift to a ‘new front door’ to healthcare for consumers would be economically beneficial for both insurers and the insured, whilst also creating structural changes to how the health ecosystem operates.

Similarly, individuals are increasingly interested in their healthcare and in self diagnosis which can act as a starting point for better patient education more broadly. Symptom checkers and teleconsultation providers are rapidly updating or launching in markets and looking to engage with governments to position themselves to support going forward. Following the peak of the crisis, continued engagement to maintain and encourage these positive behaviours and interest in health will be paramount.

Given the economic downturn that is expected to follow, we believe that affordability of private medical insurance will come under increasing pressure leading to a reduction in penetration (either in terms of customer numbers or breadth of coverage). In addition, as the virus disproportionately hits older age groups there are commercial questions regarding the impact on pricing and profitability of this segment going forward. By increasing the usage of more efficient and cost-effective interventions and pathways, or alternative lower cost propositions, these pressures could be mitigated somewhat.

3.      Leverage big data to get insights on claims management post crisis

During the SARS outbreaks in the early 2000s, insurers in Asia saw a fall in claims as consumers avoided visiting the doctor for fear of catching the virus, which in turn reduced utilization from fewer investigations and interventions. Although there was an expectation that this would result in pent-up demand and a surge in claims when the situation normalized, one former executive told us that in fact claims more or less returned to their pre-SARS levels and that this expected surge did not materialize to the extent expected.

Understanding in the weeks and months following the crisis what treatments are delayed, what are cancelled and where there are claims that never materialized (and therefore potentially where treatments are non-critical or could be resolved through alternative approaches) would improve the efficiency of the system overall.

4.      Prepare for the second order implications on your provider network relationships

As private provider capacity is offered to support the public system whilst dealing with the crisis, there will be significant knock-on effects for insurers. In the UK, private hospitals have stopped elective procedures to free up their beds to receive existing NHS patients that require ongoing medical support and to free capacity in the NHS, and then will move on to prepare for taking in COVID-19 patients by offering their ICU capacity. The government has said it will reimburse providers at cost but is yet to be seen what the financial impact will be for providers – for some it will hit profitability, for those with low utilization it may act as a timely lifeline.

What impact this has on hospital and doctor fee pricing to insurers in the long-term, and whether this will drive further medical cost inflation is unclear. Similarly, where certain service level agreements and volume related discounts apply between insurers and providers, what will happen to the contractual relationships and the rates for insurers is uncertain. Given the urgency of the current situation, and the strain on the healthcare system overall, now is not the time to engage on these topics. However, as things start to normalize, it will be important to think through how the provider network dynamics may be affected and the implication of this on customers and ultimately premiums.

These are unchartered territories for the healthcare sector, but we believe taking a proactive approach in these early stages will pay dividends in the long run as the crisis unfolds.