Tech giants are ramping up their investments in digital health initiatives, signaling some significant moves to target the health insurance space.
Google, Facebook, Apple and Amazon have invested heavily in personal health monitoring devices and virtual care and have been able to integrate these capabilities into health insurance offerings relatively easily, according to an analysis from CB Insights.
As one example, Google’s subsidiary Verily recently formed its own insurance company to provide tech-driven employer health insurance plans.
According to the report, recent investments and partnerships show the companies are targeting the overall $6 trillion insurance industry, including life and property and casualty insurance spaces.
Big tech companies have several advantages over traditional insurers: They have the data, existing customer base and distribution platforms to successfully reach insurance buyers in a more convenient and digital manner, according to the report.
"Today, big tech companies act primarily as digital enablers or distribution partners for insurers. However, if they own the data (via their hardware), analytics (via their cloud software), and distribution (via their consumer platforms), insurers are at risk of being commoditized or disintermediated," the report said.
Here are the different strategies the companies are using in the health insurance market and why they are worth watching:
- Amazon: The tech giant's recent partnerships and joint ventures could be a signal of a more significant move into the industry soon, CB Insights reported.
The tech giant is working with Cigna to provide convenient healthcare access through its Alexa smart home devices. It’s also teamed up with Blue Cross Blue Shield of Massachusetts to integrate its PillPack offering into the insurer's member app.
More directly, Amazon teamed up with JPMorgan and Berkshire Hathaway to form a self-managed health plan called Haven for the companies’ employees.
Amazon already provides telemedicine, medication delivery and app-enabled house calls for its own employees. On top of this, in April 2020, Amazon sent a survey to its
e-commerce sellers, of which there are 900,000 in the U.S. alone, asking about their current health insurance needs and pain points, according to CB Insights. It points to an ambition to expand its employee health offering to its sellers.
In the life insurance space, the company recently launched its Halo wearable device and announced a partnership with life insurance provider John Hancock.
- Apple: The company has an expertise in coupling its hardware products with software and services to offer a seamless customer experience. It has also focused heavily on healthcare, specifically on combining personal health and wellness data with its artificial intelligence capabilities, the report said.
The company has ramped up the health tracking features of its Apple Watch device. It's smartwatch now measures the oxygen saturation of users' blood so they can better understand their overall fitness and wellness.
Apple's emphasis on empowering customers to live healthier lives has obvious benefits for both life and health insurers. The company is a flagship partner in John Hancock’s Vitality program and UnitedHealthcare's health plans.
- Facebook: The social media company currently has a smaller presence in the insurance industry than Google, Apple or Amazon, but it could be a sleeping giant in the space, according to the report.
With 2.7 billion global monthly active users, Facebook has a massive user base. With an estimated 52,000 unique attributes collected per user, it has the potential to effectively model risks about individuals and businesses.
In India, Facebook has partnered with local financial institutions, including ICICI Bank and HDFC Bank, to offer insurance and other financial services through WhatsApp.
Although an early pilot for the company in insurance, Facebook clearly has the potential to grow into a major player in the space, according to the report.
- Google: In 2019, Verily partnered with John Hancock to provide a tailored life insurance product for customers with diabetes.
In August, the company announced it was forming a subsidiary health insurance company called Coefficient Insurance. In partnership with Swiss Re, Verily plans to provide stop-loss insurance by leveraging its expertise in hardware, software and data science to offer a new data-driven solution for employers.
The capital and regulatory requirements of the industry will likely deter these companies from becoming licensed insurance companies or taking on significant underwriting risk, CB Insights noted.
Instead, it's more likely the tech giants will target specific areas on the insurance value chain and expand their current efforts to new geographies or lines of business.
There is the potential for these companies to take more ambitious steps, such as becoming a licensed insurance broker. Amazon has already done this in India with Acko, the report said.
"Finding and servicing insurance customers on behalf of insurers would leverage big tech companies’ established networks and could serve as an effective business model," CB Insights said.
The company also could develop risk rating models for underwriting. Tech giants have significant data from their users, especially through their hardware products like wearables and smart home devices, that could be incredibly valuable for underwriting purposes.
But the historical returns of the insurance industry are lower than the technology markets these companies primarily target, which makes it unlikely for tech giants to become direct competitors to insurance incumbents.
"The potential of these big tech companies to move further into insurance should be on the minds of all in the industry and should motivate them to build out their own digital capabilities. Otherwise, they risk being disintermediated or commoditized," the CB Insights report said.