By Cyril Tuohy
John Hancock earlier this month released with great fanfare a “whole new approach to life insurance” that lowers premiums for customers who live healthier lives by agreeing to submit data to a wellness company.
In a news release, John Hancock touted the development as “reinventing the consumer life insurance experience.” While that may or may not turn out to be the case, the insurance company is also on a mission to reward itself.
Ron C. Sroka Jr., chief operating officer and general counsel of Evolve Consulting Group Inc. in Crofton, Md., said the big gain for John Hancock rests with the reams of data collected through its recently announced partnership with Vitality Group, a company that integrates wellness benefits with life insurance products.
“I imagine that the data is what they are looking for, not so much the results,” Sroka told InsuranceNewsNet.
The massive quantities of data will help John Hancock project its losses among the pool of people who agree to participate in the wellness program and get a more accurate gauge of the group’s collective risk exposures.
It’s a strategy that health insurers have had for a while. To a certain extent, life insurers have had it too: smokers often cough up higher premiums.
But John Hancock’s announcement that it had agreed to a partnership with Vitality to track a policyholder’s progress through a Fitbit band slapped around the wrist had taken life insurance data collection to another level.
“With Fitbit, the amount of data they get is astronomical and everybody‘s rushing to see what they can do with it,” Sroka said.
Underwriters at Vitality and at John Hancock will be able to compare their books of data. John Hancock will come away with a gold mine of information tracking individual and collective wellness and healthy living habits.
“People who are going for this are going to succeed so it’s a healthier pool and so the question (for John Hancock) is whether this is a pool they want,” he said.
In an interview with CNBC, Michael Doughty, John Hancock president, said policyholders benefit when insurance carriers keep track of their activity.
“There’s no such thing as a negative point in this program,” he said. “If your cholesterol is higher than range, we don’t penalize you for it, you just don’t get credit for that.”
Policyholders reach silver status with 3,500 points and earn a 5 percent premium discount, gold status with 7,000 points and earn a 10 percent discount, and platinum status with 10,000 points and a 15 percent discount.
Policyholders rack up points through daily activities that include walking, running, going to the gym, submitting to an annual physical, getting a flu shot, going to the dentist or participating in a five-kilometer race.
“We never use it against you,” Doughty said. “If you’re in the program and achieve gold status, you have to achieve that every year. You can’t do it one year and be gold for life because obviously we want you to be healthy.”
John Hancock said its Protection UL (universal life) with Vitality is approved for sale in 29 states. The company also said its Term With Vitality is approved for sale in 20 states. More states are expected to grant approval throughout 2015.
The company also said it plans to add other insurance products to the Vitality portfolio later this year.
Sroka said that because life insurers are less regulated than health insurers when it comes to collecting personal data, it will be interesting to see what other life insurance carriers that follow a similar strategy choose to do with the data.
Changing people’s behavior isn’t really the issue, particularly since people who don’t see themselves as healthy tend to shy away from wellness incentives.
With a nation facing an obesity crisis, no one expects a few wellness points racked up by a population that is already fit and healthy to make much of a difference in outcomes among a general population. Using wellness programs as tools to change behavior largely has been “a complete bomb,” Sroka said.
Still, anything to boost individual life insurance sales in a low interest rate environment should come as welcome news to an industry itching for growth.
Financial planner Brian Kuhn with PSG Clarity with offices Fulton, Md., and Virginia Beach, Va., said John Hancock’s initiative is a good “conversation piece,” that might help get a few more prospects in the door.
“We’re always looking for something to differentiate ourselves when there’s a million and one people selling the same thing,” he said.
Kuhn, who doesn’t sell policies underwritten by John Hancock, said distributors should not expect to see a torrent of sales to come from the Vitality partnership, although it could sway some prospects choosing between two policies with identical or near-identical terms.
“Life insurance isn’t really something that somebody is going to line up for,” Kuhn said. “For certain people, it will lead to them to proceed with it when they might not otherwise have done so.”
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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