Will U.S. health insurers catch up with Apple’s smartwatch?

September 9, 2014, 2:43 PM UTC
Photo by Justin Sullivan—Getty Images

Sensing a market ripe for disruption, Silicon Valley has pointed its innovation machine at healthcare. In the past several months, three new health platforms have been launched or announced by major players—Apple’s HealthKit, Samsung S Health, and Google Fit. They’re all racing to become the health data ecosystem of choice for consumers, healthcare providers and insurers. And in so doing, sending a clear signal to traditional healthcare players: disrupt, or be disrupted in the new health economy.

While the tech giants rush to innovate, many health insurers are in wait-and-see-mode. It’s too early to tell which of these three platforms will ultimately dominate, but insurance companies cannot afford to sit back and await a winner – indeed, Apple is already approaching some insurers about its digital health initiatives as it expects on Tuesday to unveil a smartwatch embedded with more than 10 sensors to monitor health and fitness signs. Insurers must decide how they want to compete in a world where health data and insight are far more accessible than ever before—or else risk losing subscribers, profits and relevancy.

One strategy is to become the Apple (AAPL) of healthcare. Think how the company controls the entire technology experience for consumers—you buy an iPad and it comes with all the hardware and software pre-installed. Apple curates everything you could want on your device and owns the app store where you buy new features. Similarly, insurers could become the major brand that “owns” consumers’ healthcare experience from start to finish. Imagine you’re sick. Instead of calling your doctor, you log in to your health insurer’s app on your device. Like a concierge service, it directs you to the right provider, helps you make an appointment, provides an updgraded and controlled experience at the doctor given you are a “preferred” customer, manages all payments seamlessly, and even connects you to a nurse for follow-up. Insurers that want to own and guide the care experience from start to finish will need to make a bet now on one mobile platform and integrate it very tightly with a selected provider network, as well as a set of clinical staff who can guide and manage members’ entire healthcare experience. Enabling this will require investment in robust analytics, marketing, and customer experience capabilities that mirror those of great consumer brands.

The second path is the opposite: Think of it as the Intel (INTC) approach. Intel has historically competed on creating the best chips, regardless of the computers they power. With this play, insurers don’t need to become the consumer brand controlling the member experience; instead, they would compete to become the provider brand of choice. This means being platform-agnostic and partnering actively with Apple, Google (GOOG), and Samsung, in a play to appeal to as many providers as possible. Because providers’ preferences for and ability to work on technology-enabled population health management programs vary greatly, insurers will need to build a flexible playbook of analytics, tools, programs, and incentives that providers can tailor to deliver better care in their respective markets. This could mean creating fully integrated groups of doctors and hospitals that manage patient care or pursuing pay-for-performance outcomes or teaching primary care physicians to play quarterback on population health management.

Finally, insurers could decide to compete head-to-head with these new mobile platforms and create their own technology frameworks for data sharing, akin to how networking companies create products to foster communication and collaboration. Again, this is a provider-driven play—Apple, Google, and Samsung are consumer powerhouses, but insurers already contract with most providers. This gives them stronger relationships and a conduit for understanding physicians’ everyday technology needs (and complaints), which could enable faster adoption. This strategy may be a stretch for some insurers, but others are starting down this path.

All three of these choices are compelling, and radically different from how insurance companies compete today. Given that the U.S. health industry is on the cusp of a massive technology-driven transformation, now is the time for insurers to go beyond underwriting risk and paying claims. They need to take decisive action to determine the new role they’ll play in this new world. Whoever makes the right strategic calls today will get a head start in helping to establish industry standards and creating the underlying framework with which all stakeholders—insurers, providers, and patients—can collaborate. The outcome could be better care, healthier patients and sustained competitive advantage for those who lead the change.

Sundar Subramanian and Dirk Klemm are partners, and Ashwin Badrinarayan and Deepak Tilani are senior associates, in the health practice of Strategy&, formerly Booz & Company, now a member of the PwC network of firms.