Insurers Get Some Marketing Advice

As more and more employers back out of the health benefit business, more and more individual consumers are shopping for health insurance these days. Yet sales have remained relatively flat. The McKinsey Quarterly reports in its most recent issue. “What,” McKinsey asks, “is preventing health insurers from effectively addressing pent-up demand?”

My first thought was that the answer might have something to do with the fact  that consumers are having a hard time finding insurance that offers good coverage at a price they can afford. But apparently I’m wrong. The article’s authors suggest that insurers just don’t know how to advertise their product: “Our research suggests that a primary barrier is [insurers’]  belief that consumers make economically rational decisions about health benefits. It’s a misguided view. Faced with more choice, complexity, and financial exposure for their health care in an increasingly uncertain world, what consumers are really seeking is peace of mind.”

But in our health care system, peace of mind is hard to find. “A combination of economic anxiety, confusing insurance products, and inadequate distribution is leading to consumer paralysis,” McKinsey warns. “Moreover, our research suggests that millions would fail to make rational economic choices even if they understood their options better. Unlike employers that purchase health insurance for their workers, consumers approach this issue by factoring in much more than expense management. More specifically, consumers’ purchasing decisions are often emotionally based.”  So don;t even try to make the product “transparent.”

So what should insurers do? Forget about appealing to a savvy shopper’s desire to get a good value for his dollars. Forget about appealing to reason altogether.  Instead “meet the consumer's needs.”  Meet his healthcare needs? No, of course not. Meet his emotional needs.

Begin With Fear    

“Although consumers are anxious, few understand the severity, or probability, of the risks they face.” the article explains. For instance, “Most consumers are unaware of how much major medical procedures actually cost.”

Tell them-- that will really scare the socks off them.

 “Additionally, few consumers accurately assess the probability of certain health-related risks. Most overestimate the risks of salient but relatively low-probability events (fatal accidents, for example) and underestimate the risk of more common health events (such as heart attacks).

“Educating consumers is an essential part of motivating them to address their concerns,” the article continues. . Messaging for example, really matters.”  What’s a message? Maybe the insurers could provide  numbers showing how likely it is that a 50 year old man will have a heart attack over the next ten years, combined with the average cost of a heart attack, set against the average cost of ten years of life insurance?  Nonsense.

As the authors point out “cost–benefit information alone fails to address emotional anxieties. Consumers often respond much more effectively to anecdotes than to a recitation of facts.” A four-color pictures of a stroke victim lying in a hospital bed, surrounded by expensive-looking equipment and maybe a caption that says “Harry let his health insurance lapse just four months ago. Now his wife is afraid they will lose their home.”  Not that’s a message. To bring the point home, you might want a picture of Jim, Harry’s twin brother, on the facing page. Jim, who is also in a hospital bed, appears to be in equally bad shape. But his wife is smiling. Caption: “Jim signed up for insurance just one week before the stroke occurred.” 

“Concern over health care financing increases significantly when a friend or family member experiences a financial crisis,” the authors note. If you want to stoke a consumer’s fears, you need to give him someone to identify with. To that end, “insurers need to explore emerging social-networking and Web 2.0 approaches. For example, sites such as PatientsLikeMe.com are showing how insurers can use these new technologies to get closer to consumers.”

Be Personal

The Internet can provide a wealth of information about insurance options,  but consumers prefer to have an insurance agent sell them the product. In fact, they want the agent to tell them which product to buy.  
“When shopping for health insurance,” McKinsey reports, “consumers accept recommendations 58 to 88 percent of the time, depending on the channel.  “Recommendations generated by a Web site, are accepted by consumers only 58 percent of the time;” recommendations from agents, on the other hand, “are accepted 88 percent of the time. Given the complicated and emotional nature of the decision and the consumers’ desire for personalized advice, agents’ recommendations continue to be the most persuasive ones.While, the Web delivers immediate information, including quotes, it does not offer a purchase experience that meets the consumers’ emotional needs.”

 Thus “Consumers who are considering purchasing health insurance actually make a purchase only 38 percent of the time on the Web, while 65 percent do so when going through in-person channels.”  No doubt, agents are much better at telling the anecdotes. And as any good salesman knows, price quotes come at the tail end of the pitch, after the customer is hooked.

“Keep it Quick and Simple” 

“When faced with complexity or too many choices,” McKinsey advises, “consumers often fail to act. For example, 74 percent of those who purchased health insurance were satisfied with the ease of the process, compared with 47 percent of those who shopped but didn’t purchase. Few consumers can comprehend the detailed information presented to them—in fact, a third of those who found the purchase process confusing cited “too much information” as the main barrier to purchasing.”

So much for consumer-driven medicine.  Don’t burden the consumer with too much knowledge about his options, costs, or what the product covers. Indeed, a seasoned insurance agent should be able to complete a sale in a very short time. Get in, get the John Hancock, and get out.  Keep in mind that McKinsey’s research shows that “consumers who do purchase or switch health insurers report that the purchase process was fast. The likelihood of individual purchase correlates strongly with the turnaround time for the application. For example, 55 percent made a purchase when the process lasted only a few minutes, compared with 21 percent for a Web transaction that took place over a 24-hour period.”
These are only a few of the suggestions McKinsey’s consultants offer to insurers interested in scooping up a share of the 140 million Americans “who currently have discretion over health insurance purchases” [translation: their employer doesn’t offer insurance], representing a total of $785 billion in premiums or premium equivalents.  They estimate that if insurance industry managed to close  the gap between consumers [emotional] needs and product purchase,” they “could increase health insurance revenues by as much as $200 billion.”

Assuming consumers can afford to fork over another $200 billion for health insurance. I still can’t help but wonder if the high cost of the product has something to do with those flat sales.  . .