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Creating Customer Value From Life Insurance's Billion-Dollar Health Records Business

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Who runs one of the world’s largest personal health records businesses? Today the life insurance industry spends over $1 billion annually on the routine chore of creating and compiling the exams, lab tests, and attending physician statements (APSs) required to underwrite the 10 million plus life insurance applications submitted in the United States. Unlike most health records, these documents and files tend to be imaged or otherwise organized into digital formats to drive down the cost of the underwriting process.

What if this routine expense could be transformed into a value added service that customers appreciate and look forward to receiving? And what if the value of this service shifted the customer’s perspective to the point that they didn’t really mind the wait for their policy to be underwritten?

Does this sound a little too good to be true? Well, another way to look at the process of compiling health records for the proposed insured is that the industry is already doing over 95% of the work involved in creating a personal health record (PHR) for the customer without delivering the information in a PHR format (see definition sidebar).

According to a 2008 Markel Foundation study, about one out of two people (46.5%) now claim they are either interested or very interested in setting up a web-based personal health record. That would mean that as many as five million life insurance customers a yearin the U.S. alone might be immediately interested in having the insurer transmit their exam and lab reports into a personal health record that they control. With the appropriate investments in marketing, packaging, and promotion, this just might be one of those rare opportunities for transforming an internal cost into a valuable customer benefit at very little additional cost. Let’s examine how that might be done.

Creating a PHR pilot project

Many innovation strategies in recent years have focused on trying to avoid lab tests and exams altogether by making increased use of electronic access to prescription profile data, MVRs, and MIB reports at the point of sale for lower face amount policies. However, this innovation strategy involves moving in the other direction by packaging the exam, lab reports, and other health records into a well organized and up-to-date PHR that the customer appreciates as a value-added service. Here are a few things to think about for companies interested in evaluating this strategy:

Pilot A Health Records Transmission Service: This opt-in service might include an offer to transmit lab results and exam data to a customer PHR. With this service a proposed insured can ask that his or her health records be transmitted to one or more PHR services you have decided to support.

Free PHR Services: There are a number of PHR services that have come into the market over the past few years. Two of the biggest players to enter the personal health records marketplace have been Microsoft (HealthVault) and Google (Google Health). Both of these companies have released free services designed to help consumers control their health records in a secure environment. From a risk management perspective, both of these companies also have a great deal to lose if they fail to manage the health records entrusted to their platforms in a secure manner.

Privacy & Customer Control: Any service supported in this pilot project should offer strong privacy protections, including clear and explicit opt-in consent from the proposed insured for any release of their health information for any purpose (including the initial transmission of lab and exam records from the carrier). Some PHR vendors sponsor their “free” services by using the account holder’s information in various ways under “blanket” permissions granted at the point an account is opened. We recommend you avoid these services.

Transmission Expense Curve: The added per insured cost of securely transmitting a set of personal health records to a Microsoft HealthVault Account (using an approved application provider) is between $5 and $10. While this is certainly not a trivial expense, companies concerned about covering this added cost might find that many customers will be willing to pay a small fee to gain control over their health records. This cost will probably fall to a few dollars per transaction or less, as volume increases in the years ahead.

The low hanging fruit is to simply take the existing expense of compiling health records and repackage it as a value added service that customers appreciate and look forward to receiving. However, there are forces in play that might create even more significant future opportunities.

Future directions

IDC recently projected that the number of Americans with electronic health records (EHRs) maintained by their healthcare providers will increase from 14% in 2009 to 25% in 2010 due largely to the massive $19 billion investment in health record adoption over the next five years authorized by The American Recovery and Reinvestment Act of 2009. As these systems are implemented, regional health information exchanges (RHIOs) are being established to facilitate the sharing of health records with authorized entities. These networks aren’t very impressive looking today in terms of size and scope. But then again, neither was the Internet in 1991 when Tim Berners Lee first released his World Wide Web software.

Another way to look at this effort is that the life insurance industry has the opportunity to channel almost $5 billion over the next five years to assist in this effort by simply repackaging an existing set of expenses into a customer benefit. But there may also be a few unexpected benefits on the other side of this near-term opportunity:

Wellness-based business models: Over the next five years U.S. health care costs are projected to grow to 20% of GDP. There is widespread agreement on very few things surrounding this issue but one piece of common ground is with the idea that investments in wellness and early detection of disease pay off many times over in reducing long-term costs and extending life spans. The health and wellness of the insured is a common objective shared by all parties to the life insurance contract.

So, what if the industry were to fully embrace this common interest and repackage the exam, lab testing and physician statements into a Comprehensive Wellness Product?

Before judging this idea too quickly due to the changes required in product development and the sales process, consider the fact that there is already an active market for these products in Worksite Wellness Programs. In the worksite marketplace employees elect to pay for worksite wellness benefits that deliver confidential annual lab testing and a wellness report with recommendations for diet, exercise and physician consultations.

Wellness products won’t be for everyone, but there is a large and growing segment of the U.S. population with a keen interest in new strategies for promoting health and one out of five adults in the U.S. now belongs to a health club.

Wellness-based product design: The life insurance industry is in an ideal position to develop products and services that embrace a focus on wellness and health risk assessment by channeling activities that the industry is already very good at into a slightly different direction.

In the process of creating comprehensive wellness products it may make sense to package life insurance exams and lab testing outside of the pricing for the core life insurance product. This could help reduce the cost of the life product while positioning the comprehensive wellness profile as a stand-alone annually renewable product. Of course the insured will control all access to this health information. When packaged as a stand-alone product this benefit can even be continued by proposed insureds whose life insurance applications are declined or not taken.

Falling attending physician statement (APS) costs: The same record transmission cost curve that we described earlier of $5 to $10 going down to perhaps $2 to $3 in a few years will also apply to attending physician statements as physician records move from paper into electronic format. For those who believe physicians might still be tempted to charge rates of $75 to $100 or more to respond to APS requests, there is a little noticed provision of the ARRA legislation which specifies that all Americans now have a right to receive health records in electronic format if those records are stored in an electronic format and that the cost to provide that transmission service cannot exceed “the entities’ labor costs in responding to the request.” Since most of these transactions will move to electronic exchanges, such as the RHIO exchanges, over the next few years, the cost to individual physicians will be just a few dollars or less. What will be the impact on underwriting quality if an APS can be cost justified on most applicants and the transmission time is within seconds?

One of the most powerful gems of leadership wisdom imparted by the late great father of modern management Peter Drucker was his observation that, “The important and difficult job is never to find the right answers, it is to find the right question.” The questions that swirl through the industry every day-”How do we reduce costs? How can we increase sales? How do we balance investment return with risk?”-are necessary but not sufficient.

It would be wrong to end this article with a recap of answers, so here’s a closing question to consider-Can the industry leverage investments and expertise in compiling personal health records into profitable products and services that put the customer in control of their personal health information while contributing to their long term health and wellness?

Ciaran Brady is vice president of operations for Fidelity Life Association, Oak Brook, Ill. He can be reached at [email protected] and Brian Mulconrey is with BG Mulconrey, Inc., Austin, Texas, and can be reached at [email protected]


Personal Health Record (PHR) Definition: An electronic application through which individuals can access, manage and share their health information in a secure and confidential environment. It allows people to access and coordinate their health information and make appropriate parts of it available to those who need it.

SOURCE: Markle Foundation –

Electronic Health Record (EHR) Definition: A longitudinal electronic record of patient health information produced by encounters in one or more care settings. Included in this information are patient demographics, progress notes, problems, medications, vital signs, past medical history, immunizations, laboratory data and radiology reports.

SOURCE: HIMSS – Electronic Health Record Association –


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