Everything in our life has changed in the last few years, we realize that we have entered an age of digital transformation in Health Insurance. The technological revolution has disrupted many areas of our life including the health care system. The fundamental change brought in the health care system is the shift of focus from volume to value. Digital transformation is completely revolutionizing health care. Now, the customers can connect, search the database, analyze and take an informed decision. This disruption has forced the insurer as well as the healthcare providers to shift from a system driven model to customer first model.

Why an insurer’s business ecosystem should change:

‘Digital’ here means the range of technologies and applications that help to increase efficiency in automation, quicker decision making, better connectivity with the customers and other stakeholders and off-course more advanced innovation driven by data. These technologies in combination with redesigning of the entire business process can fundamentally transform the way a payor organization work. Healthcare system or industry has been slower in harnessing these changes compared to other. Most of the insurance organization have only just started to wake up to this demand and adopting a customer-centric approach. On the other hand, new start-ups entering the market are much agiler and digitally friendly and could disrupt the existing model.

Health insurance should not forget the example of the music industry, where the revenues plummeted as soon as the customers got the choice of downloading and streaming facilities. The most interesting fact about this example is that it took almost five years from the time Napster was launched till the revenue were down by fifty percent to discard the false sense of security.

Other sectors are also disrupted by digital transformation. Uber has brought a total shift in the taxi industry, Airbnb is doing the same in the hotel industry, Netflix, Hulu and Amazon have radically changed the TV industry dynamics.

The industries more closely related to health insurance have also witnessed digital disruption including financial services. Property and casualty insurance and personal/retail finance have all fundamentally changed the consumer buying pattern from a traditional broker led sale to a direct distribution.

Healthcare industry is also going through the transition driven by big data revolution, other technological advancement and also aging demographics, so there is no reason to believe that health insurance sector will remain unaffected.

A recent survey by one of the health insurance giants suggests that digital transformation will account more than 50% of their strategic IT budget in the coming three to five years.

However, not all the insurer are ready to accept the fact that, digital transformation is going to or rather has started to cause disruption at a much faster pace than they could imagine. In a number of industries, there has been a delay of around four to five years from the time a new digital technology is sprung to the time its disruptive effect becomes apparent. The delay was caused mainly two factors: the speed at which consumer behavior changes and the time till the huge advantages in scaling that digital can provide take hold of an entire industry. Both factors combined when reached a tipping point, the subsequent change could dramatic, to say the least. In many industries, it was observed that, those who can get ahead of the changes finally take the lead and gain considerable value. The insurer should learn from these facts because if they wait to see the disruptive effect to be more apparent then it may be too late to change.

Digital technologies are here to help the payors

Payors, if they want to extract the maximum benefit from digital should look at it not as a thing but as a way of work. Digital can create a significant positive impact on payor economics, through four initial channels –

• Stronger and effective connectivity: digital provides payors new ways to communicate with all stakeholders. For e.g. consumer’s buying process could be more simplified and easier. It can help consumers to select the right product based on their specific needs and effectively make them more empowered to better manage their health.
• Better and quicker decision making: digital with the help of big data analytics helps to implement value-based reimbursements and other payment innovations. It would not have been possible otherwise.
• Digital enables greater efficiency and automation: digital makes it possible to radically reimagine their workspace. Even five years ago, it was not possible to imagine the current workflows based on a clean sheet design.
• Digital enables more advanced innovation: digital helps payors to take a different approach in relation to care delivery model. These include, wearables that monitor the health status of the patients with chronic conditions, prescribing telemedicine, enabling virtual visits to the doctor that reduce the need for in-person consultations etc.

Payors can achieve significant benefit by combining these four levers.

Impact of digital transformation on financial management

The digital will be able to significantly decrease the cost of medical services on a longer term. These savings will come from the substitution of lower-cost services for more expensive alternatives like remote monitoring and virtual visits. Although primary care services are going to be more costly, the estimate shows that this increase in cost would be more than enough to offset by lower utilization of more expensive services like admission to hospital.

Digital will help in organizational transformation

Health insurance organization today, is designed to optimize for specialization and efficiency in performing current processes. As a result of this division of work, consumers as well as the employees find it hard to question the status quo and suggest new ways of working. Most often, business leaders are highly resistant to innovation and cross-functional collaboration, but, digital is here to change all these. The companies need to revisit how their organization works and start with the customer. It is important for the top leaders to understand the journey by their stakeholders – consumers, providers, employers, brokers. A journey is an experience in totality from the beginning to the end. Understanding, this would be the key to start overhauling your organization’s way of working using the digital technologies.