Peering into the Future of Health Insurance: Real-time Data and a Whole New Way to Look at Actuarial Science


“At Lemonade…their hope is to remake insurance as a social good, rather than a necessary evil.” – Dr. Peter H. Diamandis

The structure of ObamaCare® requires people who don’t have health insurance to purchase it; if you can’t afford it, the government will subsidize your payments. If you don’t sign up, you pay a penalty. If you wait until you are sick, you can sign up and your bills get paid. This system turns traditional actuarial science on its head because the insurer can’t reject applicants – all comers are in – so the insurer has no control over its insured pool.

Insurance of all sorts is based on predictive analytics derived from retrospective data. Experience would suggest that if you have run a bunch of red lights and have a drawer full of speeding tickets, that you are a higher risk to insure for a car accident than someone who drives the speed limit and obeys all the laws. Based on retrospective data, the car insurance company can make predictions about your future behavior and the amount of risk that it is assuming by issuing you a policy.

But what if a car insurer – or health insurer – could track your behavior in real time, perform some predictive analytics based on the collected data, and generate a premium based on that real-time data?

Ah, the Joy of Data

Our man at Singularity University  and Human Longevity Inc., Peter H. Diamandis, MD, is exploring what he describes as the “demonetization of insurance.” In an email last week, he described a new insurance model that is already in practice in homeowner’s insurance and the effect it will have on health insurance in the future.

The future of healthcare is about real-time data collection, analysis and informed action.  His concept takes the value of informed decision making to its logical conclusion.

Where Health System Ed imagined just a few years ago that the collection of health data from the universal set of all patients – and the resultant best practice clinical protocols – would reside in a big electronic patient record database to determine the best course of action during a single encounter, technology galloped ahead of that concept. The proliferation of personalized health information and tracking devices appears to allow patients to go straight to self-management of disease. It also goes straight to self-determining your health insurance risk to create your own risk pool.


Here are excerpts from Dr. Diamandis’ September 26 email where he describes Lemonade Insurance Company   in New York State – a peer-to-peer homeowners’ insurance company that is making the traditional insurance model obsolete. Lemonade isn’t just an insurance company; it is a non-profit organization with a humanitarian mission.  It’s worth reading through his description of the homeowners’ and car insurance concepts because when you get to the upshot, the application to health insurance will be obvious.

Dr. Diamandis:

…I have been advising and am a proud board member of a new company called Lemonade Insurance Company that is rebuilding the insurance model from the bottom up — it is the world’s first “peer-to-peer” (P2P) insurance company.

Imagine just 90 seconds to get insured, 3 minutes to get paid. Zero paperwork.

P2P reverses the traditional insurance model. They treat the premiums you pay as if it’s your money. With P2P, everything becomes simple and transparent. Lemonade takes a flat fee, pays claims really fast, and gives back what’s left to causes you care about.

This week Lemonade launched their service and announced that they’ve been licensed as a full-stack insurance carrier by New York State for homeowner and renter’s insurance…

Fraud consumes as much as 38% of all the money in the traditional insurance system, inflating premiums by $1,300 and making the claims process protracted and unpleasant.

This happens because there is a lack of transparency in a largely analog (rather than digital) system with many humans in the loop.

If you could digitize the entire process – from signing up to submitting a claim – and give the insured individual full transparency over the status of their request, adding in automation and machine learning, you can dramatically reduce processing time and costs.

This is what Lemonade does at its core. “Technology drives everything at Lemonade,” said Shai Wininger, president and cofounder. “From signing up to submitting a claim, the entire experience is mobile, simple and remarkably fast. What used to take weeks or months now happens in minutes or seconds. It’s what you get when you replace brokers and paperwork with bots and machine learning. Zero paperwork and instant everything. . .

Imagine finding a group of peers, who you trust and can vouch for, and coming together as a group to self-insure.

You skip the centralized, expensive middleman insurance carrier – instead, a technology stack (app, database, AI-bot) manages a decentralized network of people who pay premiums and file claims that the group approves.

This takes out an enormous percentage of the cost structure of traditional insurance. Instead of paying fees and insurance company salaries, your peer group will be able to decide what to do with the extra cash that wasn’t paid out.

At Lemonade, you actually have the option to donate underwriting profits to nonprofit organizations of your choosing. Their hope is to remake insurance as a social good, rather than a necessary evil. . .

When talking about life insurance, it’s going to be difficult to ignore genomic data. Your DNA is your medical future. It’s predictive of what’s likely to inflict or kill you…It’s in their best interest to do so. [Click here to see Health System Ed blog on Human Longevity Inc.] You’ll be able to upload your genomics data and find others in your peer group that have similar or better risk profiles than you do…

For life insurance companies, I believe there is a beautiful alignment of incentives coming soon. These life insurance companies will use genomics information to help their clients stay alive longer.

Why? Because the longer they are alive, the more premiums they can pay…

Sensors will allow insurance policies to be based on actual data (e.g. usage, health), rather than general heuristics and rules. As an analogy, check out Progressive Insurance’s SNAPSHOT Automotive Sensor package – it’s a sensor you put in your car that tracks how well you drive. (Do you brake hard? Speed? Take high-speed turns?)

When your insurance policy is based on how you actually drive, rather than just your age, gender and what kind of car you own, safer drivers win.

Sensors will have the biggest impact on health insurance, as hundreds of new health sensors are coming to market in the next 5-10 years.

Sensors tracking healthy behavior such as how much you exercise and what you eat, will get you low insurance costs…

In the near future, with the peer-to-peer model, you’ll soon upload everything from what you eat to the number of steps you take per day, and find a group with similar health profiles and self-insure.

Thus spake Dr. Diamandis. The pace of innovation just may outrun our problems.

What do you think?


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>