Evan Tanotogono discusses how a digital approach to product development could help drive up penetration in low-coverage markets such as Indonesia
It’s a concerning fact that penetration of private health insurance in Indonesia is very low (less than 5%). For a country with a large young population and a growing economy, where affording insurance should not pose an insurmountable hurdle, it’s worth asking why.
Indonesians don’t buy insurance because they feel they are not getting the best value for their money. While many have the purchasing power to afford insurance, around six out of 10 Indonesians still think it’s too expensive and complex.
Providing insurance is complicated – from modelling its prices to marketing a counterintuitive product (pay a part of your income now for something you hope won’t happen later). Every step, from product creation to sales, is challenging. When we look at how insurance is done, there are three main issues with conventional models:
- Using high-touch distribution to address low penetration: Companies address the low insurance appetite using high-touch marketing, spending a fortune on hiring agents and conventional distribution channels, which drives prices up. In turn, insurance companies must enrich their product specifications, sometimes with gimmicks, to justify their pricing and model. This makes the products more complex and expensive.
- Non-streamlined health claim flows: There are many inefficiencies in the insurance claim process. Policyholders often don’t know how best to pursue healthcare, adding to extra costs.Additionally, hospitals fail to optimise services where an insurance claim is made, a problem exacerbated by the tedious process. To make up for costs and time, insurance companies are forced to create products with higher price buffers.
- Limited attention to wellbeing: Health is not a priority for most. People often choose short-term pleasure over long-term health effects, or brush symptoms of illness off as something for later. As a result, health claims are often made at a stage where illness is severe and costs are expensive.
Introducing a better way of providing insurance requires getting rid of the old mindset. We need to go back to the heart of what insurance is – a product that brings value, improves lives and helps without any hassles. To make insurance products more sellable, they must be repositioned so that they cater to people’s needs.
A more holistic approach to health would deliver better value while saving costs. There are three big levers that insurers can use to optimise pricing: optimising claim flows through appropriate primary care, enhancing wellness, and digital-first marketing.
The essence of primary care is to optimise the claim process – providing optimised referrals to specialists or more advanced courses of care, without patients having to do the guesswork. Ideally, this would be done by GPs serving patients face to face. However, Indonesians sometimes skip this step and pursue what they think is best, which leads to inefficiencies. We can change this by integrating primary healthcare with digitisation, making healthcare processes more efficient.
Patients often equate good medical treatment with expensive hospitals, without regard for what treatment they need – something primary carers would be able to advise on beforehand. For example, Indonesians often feel dissatisfied if they are not given medications – the word berobat, which in the Indonesian language literally means ‘to obtain medicine’, has been used by Indonesians to describe a doctor’s visit. This mindset leads to over-prescription. Other issues, such as unstandardised treatments from providers, worsens the issue.
Insurance companies are forced to spend on excessive costs, which drives insurance prices up and does not serve the saleability of the products.
This problem can be solved via digitised primary care, standardising the process while saving costs and time for patients and insurers alike. This would include:
- Artificial intelligence-assisted teleconsultation: Artificial intelligence can minimise repetitive questions and translate patients’ complaints to symptoms that are understood by doctors, leading to faster and more standardised treatment.
- Standard protocols: Using technology, there can be set rules for triage, prescription, dosage of medication, and monitoring important metrics such as prescription rate and basket size – this optimises treatment and allows for data-driven improvements.
There are two challenges in implementation. First, there needs to be a balance between creating something convenient for users and controlling costs, because it takes a lot of work to create digital primary care products that users are comfortable with. Second, the product needs to be trustworthy. Since digitised care offers users a different path than what is conventionally seen as ‘best’, digital care service providers need to make a compelling case that it would offer efficient and effective health outcomes.
The key to resolving these issues is data analytics. By keeping and analysing patients’ electronic health records, digital care service providers can help primary doctors working with digital technologies to gain 360-degree view of patients. This leads to better diagnoses and recommendations for users.
“Done properly, digital marketing can deliver returns that improve over time, instead of stagnating”
Research shows that the mathematics of non-communicable diseases (NCDs) are driven by simple metrics: body mass index (BMI), fat, sugar and blood pressure. These metrics can reliably tell how prone an individual is to NCDs and their overall risk. The healthier somebody’s BMI, the less likely they are to be admitted to a hospital – and even if they are, they will spend fewer days there and incur fewer expenses. It is therefore in the interest of insurance companies to incentivise people’s health. It’s basic behavioural economics: burn some amount upfront; save more later.
This new targeting strategy requires insurers to create better value for money by managing premiums that are still attractive to healthy individuals. After all, healthy people are less likely to feel they need insurance, and expect to be differentiated.
The model in Indonesia incentivises the unhealthy to buy, as they can do so at roughly the same price as a healthy person. An insurance that can entice more healthy people to join would enjoy a healthier pool and lower risk, which leads to affordability.
Digital-first marketing plays a big role
At some point, Indonesia’s leading health and life insurers became convinced that insurance is a product that needs a push to sell, and so cannot be sold digitally – and that even if it was, sales would be difficult and returns low. This has since been proven wrong. What an insurer needs to sell a product is simple: a saleable product.
They also need to do digital-first marketing properly. Note that this is digital-first, not digital-only; insurance providers still need an omnichannel approach, but it would be spearheaded by digital interactions.
What people get wrong about digital marketing is they think it is like marketing via a billboard: plan once, prepare relevant assets, put it on digital ads and pray for conversion. Then comes the monthly review, where, unsurprisingly, results are disappointing – and management concludes that digital marketing doesn’t work.
To market digitally, you need to do a lot of A/B tests and micro-segmentations to see what works best. You also need to bear in mind that insurance has a long purchase funnel, meaning insurers need to tag strangers and have proper behavioural analytics. Retargeting and lookalike marketing are key here.
Done properly, digital marketing can deliver returns that improve over time, instead of stagnating in a ‘billboard mentality’. Insurance providers must adopt the view that digital marketing is an evolution of thought. Continually improve your strategy and your sales will improve, too.
Insurance is not an easy business, but it can be made easier if insurers pay attention to the right things. By integrating proper primary care, wellness and digital-first marketing, insurance providers can solve major issues in traditional insurance, and drive sales and penetration. This is what insurers should aim to deliver: better value for customers.
Evan Tanotogono is CEO and co-founder of Rey, a new health, life and critical illness insurtech in Indonesia
Image credit | Shutterstock