A “Nudge” for Wellness

Over the last several decades, lifestyle diseases such as cardiovascular disease, cancer, diabetes and chronic respiratory illness have developed into a worldwide epidemic. According to the World Health Organization, these diseases are the world’s biggest killers, causing an estimated 35 million deaths each year – that’s 60% of all deaths globally.

These diseases are largely preventable: up to 80% of heart disease, stroke, and type II diabetes, as well as over a third of cancers, could be prevented by eliminating their primary shared risk factors: tobacco use, unhealthy diet, physical inactivity and the harmful use of alcohol. These chronic conditions have thus become a major burden to society, leading to a decreased quality of life, disability, increased health care costs and, more often than not, to premature death.

Additionally, although chronic disease was once thought to be a problem of older age groups, onset is rising among working-age adults, adding to the economic burden because of illness-related loss of productivity (absenteeism and presenteeism).

Concern in Japan about rising rates of cardiovascular disease and diabetes sparked passage of the “Metabo law” ^[ii] in 2008. The law, which requires local governments and employers add a waist measurement test to the annual check-up of 40-75 year olds, set a maximum waistline size of 85 centimeters (33.5 inches) for men and 90 centimeters (35.5 inches) for women. The overall goal of the law is to cut the country’s obesity rates, and failure to meet the goals results in fines to employers and local governments of almost 10% of current health payments, so clearly a societal incentive exists for achieving these goals.

Smoking is a major risk factor for cancer, heart attack and stroke, and Japan accounts for much of the tobacco consumption in Asia. Nearly 30 million people smoke in Japan, making the country one of the world's largest tobacco markets. Drinking beyond reasonable levels also raises the risk of acute alcohol poisoning, lifestyle-induced illness, depression and other health problems. Currently, an estimated 6.45 million people in Japan suffer from alcohol-related problems, and excessive drinking costs the nation ¥4.15 trillion and 35,000 lives annually^[iii].

In Japan, as in other parts of the world, there is clearly a need to incentivize people to get and stay healthy, and in the process help curb government and private healthcare expenditure. To do so, policymakers are using the principles of behavioral economics to “nudge” (or gently push) people into adopting healthier behaviors. David Cameron, Britain's prime minister, established a “Nudge Unit” ^[iv] in Downing Street soon after taking office in 2010 to achieve this end, and the U.S.’s Affordable Care Act (also known as Obamacare) uses “nudge incentives” to encourage employers to work with their healthcare carriers to offer wellness programs^[v].

The private insurance sector is also beginning to embrace “nudges”. Some of the biggest U.S. health insurers have introduced incentives of one kind or another. Most reward people for having their vital signs tested and for hitting goals such as lowering blood pressure or losing weight. Aetna, for example, offers discounts for gym equipment and medical devices that can be used at home.

South Africa’s Discovery Holdings’ has designed a wellness program called Vitality which incorporates the concept of gamification^[vi] - that is, using social game elements to incentivize participation. Discovery health and life policyholders in South Africa who enroll in Vitality are encouraged to get and stay healthy by providing them with escalating financial rewards for doing so. Vitality members earn points by engaging in health activities like exercising, buying healthy food or achieving certain biometric targets. As the Vitality members accumulate points, they achieve higher status classes, much like an airline rewards program. Discovery has also formed alliances with a host of companies to help reduce costs associated with getting healthy and provide rewards linked to Vitality members’ status classes. Woolworths, a South African grocery chain, discounts 10,000 “healthy foods” up to 25% for Vitality members, and British Airways offers discounts of up to 35% on international flights. Vitality members with Discovery Life policies can also enjoy discounts off of their risk-only cover and earn quinquennial premium cashbacks, depending on their Vitality status during the coverage period.

Building on Vitality’s success in South Africa, Discovery has also joined with Humana, Inc. in the U.S., Prudential plc in the U.K., Ping An Insurance Company of China, Ltd. in China and AIA Group Limited. in the rest of Asia to launch similar programs.

Great Eastern Life Insurance, based in Singapore and Malaysia, offer an integrated health and wellness program called "Live Great"^[vii]. Term life and disability income policyholders in Singapore can obtain a sizable discount off their risk premiums if they complete online health assessments and achieve favorable results in their annual health check. Premium discounts are not just for the healthy: Great Eastern Malaysia also encourages medically sub-standard policyholders to improve their health by giving them the opportunity, via a simplified re-underwriting process, to have medical premium loadings removed should they achieve the biometric criteria for standard ratings.

Evidence showing that these programs yield dividends continues to grow. A study by Drs. Richard Milani and Carl Lavie published in the American Journal of Cardiology found that that the dollar-for-dollar return on investment for workplace wellness programs can be as high as 6 to 1^[viii]. Other studies and results released by Discovery show that active wellness program participants have improved persistency, are less likely to fall ill and, if they do, spend shorter amounts of time either out of work or in hospitals^[ix] (should their conditions warrant hospital stays).

Successful and continued client engagement is widely regarded as one of the keys to success in any market, and for insurers, incorporating wellness programs that encourage and incentivize healthy behavior should be a wise and forward-looking choice, creating value for both companies and their policyholders.