Why Nobody Wants Health Insurance
The health insurance industry is crying out for disruption. As an example, over the past few days AAPT reported on Medibank’s results:
“Operating profit from the health insurance business fell 8.2 per cent to $249.4 million for the six months to December 31. ……
Medibank's revenue from health insurance premiums rose 1.2 per cent to $3.12 billion, and the group paid out $2.6 billion in claims. But the number of policyholders fell by 2.3 per cent to 1.78 million. The number of policyholders under the Medibank brand dropped 4.1 per cent to 1.48 million, partly reflecting some negative customer reaction to the new IT system.
Medibank says industry volume growth continues to slow under challenging conditions but the group underperformed relative to the market in both customer acquisition and the number of lapsed policies.
Market share and gross margins also slipped.”
So, what is going on here? Is this a problem unique to Medibank? While there might be “challenging conditions” and “some negative customer reaction to the new IT system”, there is a much greater problem afoot here: no one actually wants health insurance.
“What”, you say, “of course people want health insurance….”. Think about it, though. You pay money, probably by direct debit, into some company’s bank account and you get back: nothing. Yes. Nothing. And next month you pay money once again into some company’s bank account, and what do you get back this time: nothing. Makes sense? A good business model?? Value for money? A great customer value proposition?
“Ahh”, you say, “but when I get sick the health insurance company will cover me. I will be protected”. Sure. So you think. You may get some of the costs back if you have paid in enough money to that elusive back account over time, AND if you comply with the “terms and conditions” of the health insurance company that you had no part in drafting, let alone remembering what they were.
Health insurance companies need to remember that, despite thinking that they have a great product offering that people should be clamouring for, and despite the millions of dollars in slick television advertising, no one actually wants their products. They may “need” their products when they get sick, but no one “wants” them. A bit like a mortgage. No one wants a mortgage either.
So what is Medibank to do? Put in a new IT system? That will probably make the selling of a product that no one wants more efficient. Enhance their customer service? That will make the buying of a product that no-one wants more enjoyable. Neither of these addresses the fundamental problem of understanding deeply the needs, the gains and the pains of the consumer and delivering a value proposition that delights the consumer.
This is where Design Strategy and Design Thinking can add value. Let’s empathise with families where illness takes place. And older Australians. And newlyweds. And couples just starting a family. Let’s try and uncover the needs of these segments, the gains that they want and the pains that they would rather get rid of. And then let’s distil down these observations into insights and solutions that blow the consumers away so they start to say: “I am so excited! That’s exactly what I want”.
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Managing Director, The Strategy Group
Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well known startups. Jeffrey’s corporate background includes leading global innovation strategy at Cisco, working with large corporates such as Adobe, Westpac, Telstra, Woolworths, and Perpetual.