Technology and demographics are increasingly making telehealthcare a reality for the insurance and long-term care industries. Simon Arnold looks to the near future.
About 3,030 people with diabetes, heart failure or chronic obstructive pulmonary disease were included in the trial.
The telehealth results were more compelling than most people had imagined. The trial reported:
■ 45% reduction in mortality rates
■ 20% reduction in emergency admissions
■ 15% reduction in A&E visits
■ 14% reduction in elective admissions, and
■ 14% reduction in bed days in hospital.
So, returning to the topic discussion, just where and how will telehealthcare impact on the insurance market? Broadly, this falls into three areas: claims management, mortality projections, and greater use of care services within long-term care markets.
From a claims management perspective there are two focus areas: the management of current claims and the prevention of likely future claims.
More than 15 million people in the UK have a long-term medical condition, with interventions representing a significant proportion of claims in the private health insurance sector. For example, diabetes patients often require hospitalisation as a result of related conditions, which are covered under their private health schemes.
If you consider heart disease and cardiology insurance claims in particular, the advantages of someone avoiding an A&E admission may not be obvious until you consider that, while the initial acute service costs may be picked up by the NHS, the fact a person has been via A&E is likely to mean their post-hospitalisation propensity to claim will be higher. The question becomes how to avoid this acute episode in the first place.
Similarly, there are 8 million people with hypertension in the UK and this condition can ultimately lead to higher cost claims linked to cardiology-related conditions. Insurers could, therefore, educate people to take care of themselves by giving them the ability to track their key biometrics and then take action to keep well over time.
This has been ‘tested’ by some insurers as more of a ‘wellbeing’ programme, but could become far more targeted to specific conditions and risk types in order to control loss ratios and support customer health.
But regardless of the evidence, the practical implications often require something of a leap of faith. This leap is not dissimilar to that made by protection providers, such as Unum and Aviva, which have championed rehabilitation as a way of managing costs and helping customers back to good health.
This is considered the norm now, but was radical in its day as rehabilitation (as with telehealthcare) requires a known initial outlay to offset against an unknown ultimate cost. In the future, we can see certain insured lives having telehealthcare both as a standalone offering and included as part of the rehabilitation (or indeed ‘prehabilitation’) offering to support the recovery process with a reduced need for consultations and interventions.
Longer term, telehealthcare could have a much broader impact from an actuarial perspective as it has been proven to improve mortality by 45%. This could have ramifications for life insurance and annuities in particular if, as expected, current pilots evolve into mainstream large-scale clinical pathways.
Impact on long-term care
Turning to long-term care, telehealthcare adds another dimension for post-retirement clients, or those with power of attorney. Readers are likely to be familiar with the Dilnot Report and the proposed funding guidelines.
While the suggestions may not be the ones ultimately sanctioned, a funding solution will have to be found, and this will create a more buoyant market for long-term care products and solutions, both insured and including the likes of care-based equity release.
Faced with care home bills upwards of £30,000, propositions will be sought to maintain living at home rather than in a nursing home for both cashflow and estate planning reasons. But at some point, long-term care insurance will make a reappearance and managing outcomes and controlling claims will be critical.
It is likely financial support will be offered to an insured person who requires domiciliary care supported by technology rather than full residential care.
As an example, consider the estimated 600,000 people with dementia in England, which by 2030 will top 1 million. Many dementia patients would rather stay at home as it is an environment which they are familiar with.
But the risks associated with independent living are obvious. For a few hundred pounds, telecare can provide solutions that vastly extend the time that a person can retain their independence, with the ability to monitor everything remotely. Such things include whether they have left a property; bed and chair occupancy monitoring; activities of daily living; and fire, temperature (hot and cold), flood and gas monitoring.
The other potential long-term care solution that is still in its infancy is equity release. Today, most equity release is lifestyle enhancing. However, we would expect an increase in domiciliary care and an option to buy a packaged service that not only releases cash, but also bundles the necessary home improvements and support required for older age into the costs.
In conclusion, telehealthcare will fundamentally change the provision of care in the UK over the forthcoming decade. It is not a question of if, but when, given the government’s need to improve service, while also saving money. The issue for financial services providers is how it will impact on them and, more importantly, how they can use it to their advantage.
Simon Arnold is managing director of the Tunstall Group
