New York
Brian and Carla Restid, a couple in their mid-60s, bought life insurance four years ago to protect their lifestyle in retirement. A year later, they upgraded to a pilot programme offered by the insurer to get fitter, healthier and more energised.
In exchange for working to improve their well-being and providing details about the process, they have saved $700 so far in premiums. “It provided a way for me to be accountable to myself,” said Carla Restid. “It provided me a way to get going and keep going. I was exercising before, but it wasn’t at the forefront of my mind. This set me on a life-changing programme.”
The program they joined, known as Vitality, will now be included in all new life insurance policies underwritten by John Hancock, the financial services company. It was developed in conjunction with Vitality, a South African company that works with insurers around the world on similar programmes.
“Vitality has been an optional benefit,” said Brooks Tingle, president and chief executive of John Hancock Insurance. “Now, we’re saying we won’t issue life insurance policies without these Vitality benefits on them.”
If they participate, customers will be able to reduce annual premiums by as much as 15 per cent, but they will also be asked to report their habits on eating, drinking and exercise — or lack thereof — to their insurance company.
“For an insurer, you’re going to get healthier people — that’s why they’re going to give you all their data,” said Katherine L. Milkman, professor of operations, information and decisions at the Wharton School at the University of Pennsylvania. “The unhealthy ones are going to go to other insurers. The question is, how effective will it be once they’ve selected all the healthy people?”
For life insurance sales agents, this is a new pitch. No longer will they have to dance around the issue of death. Instead, they can put the buyer in charge, offering lower premiums and a range of financial inducements for the policyholder to try to live longer.
After every 10 workouts, the Restids get to spin a wheel of fortune on a mobile app and accrue points for gift cards at various retailers. Brian Restid said that when he and his wife travelled to New York for a wedding this summer, they stayed at a hotel that was part of the programme and their $2,100 bill was cut to $900. Carla Restid said she used the gift cards to shop on Amazon.com.
This may sound trivial, but behavioural economists say short-term rewards drive long-term results. “The main thing we’ve seen in a variety of studies looking at health incentives is that healthy people are very interested in being in these types of programmes,” said Justin Sydnor, associate professor of risk and insurance at the University of Wisconsin at Madison.
“One, it’s about money, but two, healthy people don’t like to fail at getting the incentives. People who know they’re going to struggle aren’t as interested in programmes like this.”
For John Hancock, a division of the Canadian insurer Manulife Financial, the programme is good for business. “The longer people live, the more money we make,” Tingle said. “If we can collectively help our customers live just a bit longer, it’s quite advantageous for us as a company.”
What John Hancock is trying to do is not easy. The pilot programme, started in 2015, has not been a roaring success: Only about 20 per cent of customers signed up that year. Three years later, the company said it had doubled that figure, which experts said was below expectations.
“It’s a great idea to extend it to their full line of products, but they have not had spectacular success with the product so far,” said Steven N. Weisbart, chief economist at Insurance Information Institute, a trade group.
“People do respond to incentives,” Weisbart added. “But the question is, do people respond to these incentives? The answer seems to be, not really.”
Tingle said that what drove the decision to make Vitality mandatory on all new policies was not the adoption rates but how customers used the offering. Over the past three years, use of the software has increased 706 per cent.
Beyond lower premiums, the company has tried different strategies to get customers involved. One shows just how motivated people are by incentives. For instance, customers can sign up to receive an Apple Watch. If they meet a set of monthly health and wellness goals over 24 months, the watch is free; if they fall behind, the watch is billed in instalments of $15 a month.
In behavioural economics, this is an example of how the fear of losing something works. For the promise of saving a mere $15 a month, John Hancock can nudge people into compliance.
“People like free things in general,” Tingle said. “But I get letters from very wealthy individuals who are obsessed with getting that bill to zero.”
The market for life insurance in the US is vast. About half of Americans own some form, but only a third own individual policies, which are more profitable than group policies they could get through work. The most common reason people list for not buying life insurance is cost, according to Limra, an insurance industry research group.
