2023 Insurance Trends Report: Health in a Virtual World

If there’s anything that COVID-19 has brought to light, it’s that our existing Canadian healthcare system is severely strained and has been for at least the past decade.

For patients, the inaccessibility and low patient satisfaction have led to cancelled medical appointments, longer waiting lists and delays in both diagnosis and treatments. While workforces deal with absenteeism and reduced productivity of employees, group benefits insurers are absorbing a growing share of healthcare spending. Insurers absorb about 7 per cent for prescription drug costs while the percentage funded by both individuals and governments has fallen.

These trends threaten to undermine the financial health of insurance plans, with employer medical benefit costs in Canada set to rise to 7.5 per cent in 2023, after already rising 7 per cent in 2022.

In GFT’s recently released 2023 Insurance Trends Report : Health in a Virtual World, which included data results from their Digital Insurance Survey of Canadian Consumers,  an emerging trend that can no longer be ignored is digital health ecosystems, where group benefits insurers can play either central or supporting roles in bringing together a variety of health partners.

Benefits of Digital Health Ecosystems

• Virtual mental healthcare’s success during the pandemic. When in-person appointments weren’t possible, Canadians turned to new ways of consuming healthcare services. Since 2020, between 24%-42% of Canadian healthcare services have been delivered virtually, and mental health services rose to 57% in 2020-2021 from 9% in 2019.
• More shared data, more opportunities and cost-saving solutions for customers and insurers. In our GFT Digital Insurance survey, we found that less than half of Canadians feel the information they receive is useful, and only 26% are receiving useful personal insights. The enormous quantity of data created by an ecosystem enables a ‘virtuous circle’ of continuous improvement: the more users, the more data is available, leading to even better insights.
• New opportunities for insurers in a prevention business model. With more insights, insurers can better anticipate the future needs of individuals and bring on board new partners to achieve this. By working with partners in an ecosystem, insurers can evolve their risk management business model towards one that focuses on health prevention, improving the value proposition and in turn attracts more plan members.

Challenges to Digital Health Ecosystems

• Hesitancy for Canadians to share health data. Globally, there has been an increase in willingness to share health data, but in Canada only 48% will share information to save money, and 42% would for better access to services. Currently, Canadians continue to trust insurers with their data. Consumer willingness to share their data allows insurers to create valuable and highly personalized offers priced according to real risk, and to direct them towards services that are relevant for their life events and health status.
• Competitive nature of ecosystems. By improving customer loyalty and giving insurers a competitive edge, ecosystems deliver unprecedented value. By 2025, McKinsey believes that a dozen ecosystems will emerge, representing 30% of the world’s GDP, and digital health ecosystems being the largest. Competition for building these kinds of ecosystems will also come from outside the traditional insurance market, with distribution and advisory companies and healthcare technology providers building centralized platforms that aim to interconnect all elements of one’s health journey. TLDR: If group benefit insurers don’t move into this space soon, someone else will.
• Insurers need to decide their role in digital health ecosystems. An ecosystem typically has an orchestrator, or central partner, which pulls the network of partners together. While insurers can generate increased and diversified revenue, real risks are found without a robust strategy to handle data analysis, data security, the incorporation of new technologies and the precise role of partners. Some insurers are focusing purely on partnerships to make these extended offerings available for plan members and sponsors, while others are focusing on a combination of partnerships and vertical integration through the acquisition of health providers. Closed, open, or dynamic, incorporating competitors – the options to an ecosystem are endless, insurers just need to figure out where they want to fit into the equation.
• High costs. To change the industry’s status quo, especially with the high traffic volumes of an ecosystem to provide access to even more data to analyze and act on to create further growth, costs money. To build an effective digital health ecosystem, insurers must carefully evaluate their business case, and analyze the opportunities and risks at stake.

Should an ecosystem be built around a clear digital strategy and strategic partners that can easily integrate with a modern and scalable technology platform, the benefits for insurers are potentially huge. Considering these opportunities, group benefit insurers should consider carefully their own response to these ecosystems, and the responsibilities that come with a lead role.