Private health insurance is rapidly moving toward a future where customer behaviour is monitored by health funds and policyholders are rewarded for leading healthy lifestyles.
On Monday nib, which commands about 7.7 per cent of Australia’s $19 billion private health insurance market, announced a deal with airline Qantas to offer health insurance to up to 11 million frequent flyers.
The joint venture, Qantas Assure, will reward frequent flyer members who purchase its policies with Qantas points for staying active.
Starting next year Qantas Assure customers will be able to download a “wellness app that syncs with popular forms of technology”.
The app can work with a mobile phone, Fitbit, Apple Watch, or other technologies to log the number of steps taken to calculate reward points.
Those points can be used for flights, shopping or towards the actual health insurance premium.
“In an age where we are becoming more and more concerned about obesity and diabetes this is exactly the kind of action we need to arrest the prevalence of obesity,” said nib managing director Mark Fitzgibbon.
Data from Private Healthcare Australia covering 75 per cent of industry claims showed that health insurers paid $174.5 million on hospital procedures where the primary procedure is obesity-related in 2014-15, up from $158.8 million in 2013-14.
Health funds in Australia are prevented by law from offering discounts to healthy customers to try and bulk up on fit policyholders who rarely claim.
The Qantas Assure deal is, however, one way of building nib’s share of fit and healthy members who are less likely to claim. The deal also encourages loyalty from customers who are keen to build up their reward points. The health insurance industry has been plagued by high rates of customer churn.
Qantas and nib are targeting 2 to 3 per cent market share, or between $380 million and $580 million or revenue, over the next 5 years.
That implies a total gross profit of $53 million to $80 million for Qantas Assure, which will be split by both parties, based on the 14 per cent gross profit margin typical in the industry.
For nib the actual net profit margins may be more attractive than the current 5 per cent it generates given the insurer will not be advertising to win those customers, but can leverage Qantas’ customer acquisition program.
The nib boss admitted that some Qantas Assure customers would likely come from his existing customer base, but he is confident the deal will boost nib’s market share overall.
“Hopefully it will be a new market growing the pie. I really believe that as you improve the value proposition you can grow the market,” he said,