Freemiums and on-demand deals: Health insurers revamp to chase the young

Health funds know that in this era of on-demand consumerism, younger Australians are often far from enchanted with the world of insurance.

Quarterly data from the Australian Prudential and Regulatory Authority (APRA) highlights the challenge that insurers face in courting young adults. In the June quarter, for example, the number of insured Australians went up by more than 65,000, but the number of insured people aged between 20 and 24 saw a net decrease of more than 5000.

Yet the fight for young members is key to maintaining the viability of the private health sector. Chief executives say they know this cohort wants more flexibility and personalised services, and is willing to give up some personal data to have products shaped to individual needs.

Trying to reach out to Millennials, the sector is now rushing to respond.

Bringing a “Netflix and Spotify model to the industry”: Flip insurance startup’s Kathleen Weaver and Chris Borrett. 

Over the past few months, investors and members have been given a taste of new models of health and injury insurance designed to court this group of Australians more effectively.

At a strategy day for $3.3 billion insurer Nib earlier this month, management flagged a new kind of product: one that was not health insurance at all.

A membership program called the “Green Pass” will roll out from next year, costing consumers around $5 a month. It will give users a digital health record and personal health-check tools as well as access to Nib’s medical network and the prices it pays doctors – but the fund will not cover the cost of those appointments.

Instead, users will be able to add standalones like a dental checkup or mental wellbeing offer to their pass, or take out hospital cover and other extras on top of their membership.

Chief executive Mark Fitzgibbon says the program is an experiment in approaching “non-private health insurance” customers, and it’s not yet known whether this model will help convert younger people to fuller-cover policies later on.

But given the fund’s focus on data science and broader wellness services, it makes sense to offer these to those who are yet to buy health insurance, he explained.

Nib is starting to experiment with membership models that do not involve taking out an insurance policy.Credit:Chris Hopkins

“If what we’re selling to people – particularly younger members – is as much about them understanding their individual health profile and linking them up with products and services [as it is insurance], we think that will be attractive to the value proposition,” he said.

The fund is calling this approach a “freemium” model – a phrase more readily associated with software or fintech products than with insurance.

But just as the banking sector has pivoted to new digital offers in the face of fintech disruptors, insurers are getting ready to bring their offers more in line with the on-demand economy.

Much like nib, private health insurance giant HCF kicked off its own startup earlier this month – injury insurance provider Flip.

Flip, which is run by a team of 10 led by Millennial chief officers Kathleen Weaver and Chris Borrett, lets users buy insurance to cover them for short periods of time, at $6 per day or $9 a week.

‘We wanted to bring more of a Netflix and Spotify model to the industry, and allow people to turn it on when they need it.’

The business is geared towards younger people who might need cover when participating in sporting events, hikes or other risky activities. The startup will make a direct cash payment to members when they lodge and can prove their injury and diagnosis, covering basics like sprains, broken bones or accidents requiring dental care.

Mr Borrett said the company was focused on bringing the dynamics of on-demand businesses to the insurance sector.

“We wanted to bring more of a Netflix and Spotify model to the industry, and allow people to turn it on when they need it,” he said.

Capturing the attention of young people is a challenge for insurers because many of their health concerns are tied to individual events, like active sports, which makes taking out broad policies less attractive, he said.

“When you combine that with quite complex, expensive and hard-to-understand private health insurance, it’s not a surprise that they don’t pick it up and don’t have particularly fond feelings towards it,” Mr Borrett said.

Ms Weaver said the business wanted to create an offer suitable for people in their 20s, though there are hopes that it will get them acquainted with the idea of taking out insurance as they age and find a need for broader health cover down the track.

“We’ve tried to keep prices as accessible as possible – we compare it to avocado on toast, or how many coffees it is,” she said. “We would love to keep [people] in the HCF ecosystem [beyond their 20s] so hopefully there is enough link back to our mothership.”

While the coronavirus pandemic has put affordability of private cover in the spotlight, the sector is seeing encouraging signs that demand for its services is growing.

ASX-listed Medibank Private surprised the market back in August when it revealed that despite the industry concerns about attracting younger members, the youth cohort had helped drive the fund’s policyholder growth of 4.6 per cent for 2021.

It was the company’s own youth-focused brand, ahm, which provided the boost as memberships jumped 10.9 per cent for the year. Ahm’s offers include an extras-only package for no-gap dental and 50 per cent back on extras for around $3 per week.

As chief executive David Koczkar told this masthead earlier in the year, keeping products affordable is key to retaining the young.

“Younger customers want the peace of mind [from cover], but they also want to see more value,” he said. “We need to ensure we are doing all we can to ensure the affordability of private health insurance.”

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