(Brooks Tingle, SVP, of Marketing and Strategy, John Hancock. Photo source: John Hancock.)
While many P&C and health insurers are feverishly experimenting and investing in Internet of Things (IoT) technologies, most life insurers continue to grapple with the challenge of making the IoT relevant to their industry. That’s not the case with John Hancock (Boston; over $400 billion in assets under management and administration), however, which introduced its Vitality program earlier this year. The program involves a partnership with wellness program management provider Vitality (Chicago), and provides policyholders with free Fitbit wearable devices that help people track their physical activities. The program works with almost all wearable devices such as Garmin and Jawbone, and smartphone applications like Apple Health. Policyholders log their activities with online and automated tools that are integrated with personal health technology.
Policyholders immediately begin accumulating “Vitality Points,” after their policy is issued, when they complete health-related activities like walking, exercising, getting an annual health screening or even a flu shot, and other activities. The number of Vitality Points a policyholder earns over the course of a year determines their program status level. The healthier their lifestyle, by the program’s standards, the more points they can accumulate to receive travel, shopping and entertainment-related rewards and discounts from leading retailers. A policyholder can also save up to 15 percent off of his or her annual premium.
IIR recently had a conversation with Brooks Tingle, John Hancock’s Senior VP of Marketing and Strategy to discuss Vitality and the insurer’s broader view of the IoT and customer engagement.
Insurance Innovation Reporter: The IoT is very hot in P&C insurance, but not so much in the life sector. John Hancock’s Vitality program is an exception when it comes to the use of IoT technology. Tell us a little about the thinking behind the initiative.
Brooks Tingle, SVP, Marketing and Strategy, John Hancock: It’s based on a straight-forward proposition: it would be hard to find in the insurance industry, and in society at large, a more perfect alignment of interests than that which exists between a life insurer and a customer’s desire to live a long healthy life. It’s odd, given how much we can mutually benefit from this type of solution, that as an industry we’ve been such a bystander in terms of helping customers make positive changes that impact their well-being and longevity. We’ve seen employers and health insurers deploy wellness programs of various sorts. And yet, with the average duration of employment at a given company around 6 years that’s a relatively short-term proposition, while Life insurers’ relationships with their policyholders average about two decades. Before my current role at John Hancock, I oversaw Operations and Technology, including our Claims area, and one claim that always stood out to me was for an insured who had a policy for 99 years. His parents bought it for him when he was one year old and he died at 100. The point is that we have long-term relationship with our customers, and if we can help them to live a long healthy life, we all win.
A second foundational premise is a fact: over half the deaths in the United States are directly attributable to diseases that are a function of lifestyle choices: how much we exercise, nutritional choices, whether and how much we smoke, and whether we all see the doctor when we’re supposed to.
So it’s about an alignment of interest and an unprecedented ability to influence outcomes. When you marry that to the available technology—wearables, apps, etc., it becomes a compelling proposition. Also, the key for the customer is it has to be easy.
IIR: How would you characterize the value to the insurer of having policyholders use wearable devices? Or, put another way, how do you economically justify premium discounts and other rewards?
BT: The simple fact is that when our customers exercise a bit more, eat better, quit smoking and in general, take good care of themselves, we will likely see improved mortality. That improvement is what fuels the discounts and incentive rewards. It’s really about getting people to make small changes that will impact their own longevity. You could say that, behind this offering, you’ll find roughly equal parts actuarial science and behavioral science that drive the results.
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IIR: Recently I’ve been at meetings of senior insurance executives where John Hancock Vitality was discussed as a wearable program providing data for underwriting, rather than as more of a customer engagement strategy. How would you clarify the program in that regard?
BT: I love the fact that groups you meet with think just in terms of the wearables. People latch on to that aspect of the program. But, frankly, you don’t have to look too closely to see that it’s about customer engagement. Let’s face it: in the life insurance industry, our products are at an all-time low in terms of customer engagement. This is much more about breathing life into that relationship. Today, if you own individual life insurance, you might get one notice a year from your insurance carrier. If you look at the specifics of our program, you’ll see that contact can be as frequently as daily, with points given for walking, daily exercise, and completing online courses.
The peace of mind that the life insurance industry has traditionally promised is great, but it’s not enough. With this new solution the conversation changes from being about death to being about living a healthier life, and getting rewarded for that.
The role of the wearable, for as much attention as it gets, is that it makes it really easy for customers to participate rather than having to log into some website and record all their activities. Once the wearable is synched with the program, the user will automatically get points for his/her activities. “Congratulations, you just earned 10 points for your workout today,” etc. It enables ease of participation for our customers.
IIR: What about people faking their use of the Fitbit? Is that a concern?
BT: No, not really. One of the great things about working with Vitality who has managed wellness programs for close to 20 years, starting in 1997 in South Africa, and in 2008 in the U.K. The wearables are relatively new to their programs, but they’ve seen it all. The bottom line is that, yes, people can figure out ways to cheat. However, if you look at the arc of this program, there’s probably some small amount of cost for that, but the gains individuals make from cheating aren’t sustainable. To illustrate: in South Africa, before wearables, Vitality would give credit for a gym visit, verified by the user scanning their membership card. So, predictably, people would run up, scan card and run away. Then Vitality added geolocation. Members had to have two 15 minute GPS pings in order to get credit. “Well, gee,” someone thought: “I can just hang out at juice bar.” But studies show that that people eventually come to a realization: “This is stupid—if I’m going to be at the gym, I might as well work out.”
So we’ve heard it all—strapping the device to dogs, shaking it up and down. Over the long term, all these dodges wash out. Also, there are different components to the program apart from physical activities, such as online education and health screenings—which are pretty hard to fake.
The bottom line is that we’re not so naïve that we think a small number of people won’t try to cheat, but we have enough experience to believe that they won’t prove to be material over what are decades-long relationships.
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IIR: As I suggested earlier, a great deal of attention about the Vitality program has gone to the discounts. How much of that is a matter of underwriting, how much more just a matter of self-selection of the right customers?
BT: The specifics are proprietary, but I’ll say directionally that Vitality is unlike what I understand about the automotive telematics space, where most of the benefits are what we call positive selection—someone who’s a safe driver in first place is the one who chooses to put that device in. There’s certainly an element of positive section in the Vitality program: it is appealing to those who are active. However, a significant part of the benefit is behavioral. The great thing is that it only takes small changes to achieve economically meaningful results. Nothing about this program anticipates all our customers turning into triathletes. It’s designed to give rewards for the small changes we can all make.
IIR: And so the Vitality program is designed to give the nudge necessary to encourage surpassing those minimal levels of activity?
BT: Yes. The wearable creates one easy way for customers to participate, but it also drives engagement. It’s a motivational thing. In my own experience, I look at it toward the end of the day, and if I see that I’m below the mark I want to hit, take that little extra walk.
Behavioral science confirms that we’re good at making resolutions for ourselves, but then we tend to drift back to where we were before. We’ve incorporated features and incentives in the program to address that tendency to lose momentum. For example, we have what we call the Vitality wheel (on your phone) where after 10 workouts, you get to spin the wheel, and you might get a $10 Amazon gift card or a $15 Starbucks card. Everyone loves the wheel. We’ve even had very wealthy customers tell us that they love the wheel—not that they necessarily ‘need’ the rewards, but they love the engagement.
There is strong evidence that participation in a program like this—one that regularly recognizes and incentivizes people for positive behaviors—not only correlates to positive behavior changes, but more active and engaged life insurance policyholders.
IIR: It’s a perennial lament among insurers that, unlike banks, they have very low-frequency interaction with customers. Is it fair to say that one of the major benefits of this program is to solve that problem?
BT: Absolutely. It’s not only a matter of it being nicer to have more touch-points—it’s become necessary to meet modern consumer expectations. Frankly, it’s odd that it’s taken so long for the life insurance industry to offer such things to customers when the alignment of interest is so logical. It makes sense in the same way that it does for a home insurer to give information to policyholders to prepare for a hurricane, or to give a discount for having a burglar alarm. Those types of things have been out there so many years, and it’s logical for life insurers to offer similar things to promote a long, healthy life for their customers.
IIR: Do you see long term value in the collection of data—for underwriting or other purposes—from wearable devices, whether from your Vitality customers or other sources of such data?
BT: Better technology and greater access to information has tremendous potential to improve the way we do business and enhance our relationships with our customers. For one thing, giving people better and real-time insights into how they are managing their own risk helps them to take more control and change their behavior for the better to live longer and healthier lives. Better data means better designed prevention programs for our customers. Having access to more accurate and relevant data enables us to assess risks more accurately, which in turn could result in lower premiums for many policyholders in the long-run. Aggregated personal health data can also help uncover behavioral and statistical insights on health promotion and chronic disease prevention to advance the science of health and well-being.
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IIR: One of the emerging issues of IoT-related insurance products and services is the degree of trust required to share the data generated by devices. Will insurers have to establish a new kind of trust with consumers for these products to work as well as they could?
BT: I think that’s true. I think you have to establish a foundation of trust. That isn’t helped by the traditional scenario of buying a policy, tucking it away in safe deposit box and maybe hearing from the insurer once a year. Trust starts with creating a different engagement model, where we affirmatively take on the role of being a partner to the client. We’re not shy about the fact that we benefit from our customer living longer, but given that alignment, here’s what we offer in terms of incentives and rewards to take those small steps toward a healthier life. Trust involves being up front and honest: we’ll work closely with you to help you achieve your healthy goals.
The response I’ve seen is not like any insurance product that I’ve been associated with in 25 years. There’s a passion around it that’s unlike anything I’ve seen.
IIR: One other thing I’ll bring up is that at one of the meetings referenced above, executives were expressing skepticism about John Hancock Vitality, again, mostly about whether it would succeed as an underwriting program. An analyst at the table remarked that whatever the long-term results of the program, in this case John Hancock has shown the way for other insurers in terms of being willing to experiment with new digital technologies. Would you regard that as an astute statement on the part of the analyst?
BT: Yes, absolutely! First of all, I’d say, we’re extremely confident and pleased with results so far, but nonetheless, as it relates to this kind of innovation, we’re closer to the beginning than the end. You can see the potential in the wearable space and others—where this type of thing could go. I’m willing to bet that before too many years, a significant portion of life insurance sold in the U.S. will have similar features. It makes too much sense for it not to be a part of the overall value proposition.
Congrats, Anthony, on sussing out the most important aspects of the Vitality program — customer engagement and participation, frequent customer communication, and, likely, long-time customer loyalty — and to JH for identifying a Behavioral Economics “nudge” appropriate to design a life product bringing such results. I don’t think it’s going very far out on a limb to predict that the Vitality block of business will, in time, yield the highest level of persistence that JH (or the rest of the life industry) has ever seen.