John Hancock Insurance recently announced a plan to sell life insurance based on healthy behaviors. You get a discount on life and disability insurance for exercising and reporting good blood values on an ongoing basis, not just once when you sign up.
While we have been quite vocal in saying wellness is a waste of money and potentially injurious to health and morale (and lately the two wellness trade associations themselves have candidly supported that position), we find Hancock’s strategy to be a shockingly good idea.
There are many distinctions between Hancock’s offering and health insurance. First, life and disability insurance are opt-in products. No one is forcing you to buy them in order to get health insurance at work, or fining you if you don’t. No one is violating USPSTF guidelines, screening the entire workforce, or making you get checkups that are worthless at best.
Second, the same numbers that don’t remotely add up for wellness add up quite elegantly for life and disability. Cut 50% out of your heart attack rate for the latter and you probably reduce overall claims payout by 5%. Cut 50% out of your heart attack rate for health insurance and you reduce overall claims payout by less than 1%. Additionally, Hancock can possibly accomplish that goal through underwriting. An employer doesn’t have that option. So besides being worth more, a 50% reduction is achievable.
Finally, they should be able to generate some good self-selection into this product. People have to be willing to give up some privacy, and our colleague Anna Slomovic is quoted on this topic in the article in the New York Times, but as long as you know what risk you are taking and as long as there is some recourse, it isn’t the same thing as being forced to reveal personal information for a wellness program.
One asterisk: the article says they are relying on Vitality to come up with the risk adjustments. I doubt seriously that is the case. Hancock has real grownup actuaries whose job it is to price these risk adjustments. We assume the article is wrong — Hancock isn’t going to rely on a vendor that can’t even quote Dee Edington correctly and doesn’t understand how to design a study.
Absent that asterisk, we are confident that they will be successful and wish them the best of luck.