The Future of the Health Insurance Industry in 2010

At the Rotterdam School of Management MBA students NAMES have as part of their assignment for the course New Global Business Environment looked at the future the future of the Health Insurance Industry in 2010. To download their presentation in PDF please click here.

Introduction

The world seems to be at the threshold of a medical care revolution aided by advances in bio technology, ICT, globalisation and convergence of medical standards. There are opposing views on these developments. E.g. Progress in biotechnology may eradicate diseases, but also induce ethical conflicts. Globalisation may bring more wealth, but also unequal wealth distribution, causing poorer people to spend less on healthcare and richer people develop even more “affluent illnesses”. A highly technology oriented and an ever more alienating society lets people to live individualistically and yet seek a more balanced life. Currently, health means “disease-free”. In future it may be seen as an “overall well-being of body, mind and soul”

Scenarios

Morpheus

In the “Morpheus” scenario, the health insurance industry undergoes fundamental transformation (hence the name Morpheus) propelled by advances in biotechnology, standardization, relaxation of regulations and the dominant presence of an aging population.
Biotechnology is delivering its promises. It continues on its current growth path, gains momentum supported by Governments and by the ever growing need for better health care conditions. In the short run, medical costs for new ground breaking cures are high due to insufficient scale economies and R&D costs but drop off in the medium to long term.

Titan

In the “Titan” scenario, biotechnology delivers only in fits & starts, many of the promising breakthroughs do not make to medical applications because of lack of funds, societal acceptance and technical hiccups. Except in some niche areas, the biotechnology revolution comes unstuck or gets delayed by at least a decade.
In the meanwhile, Governments realise the process inefficiencies and the high medical costs and relax some of the regulations. Users demand more from the coverage and the only way insurers can provide that is by being more profitable and bigger. To stimulate this Governments, at least among more advanced countries, deregulate the industry creating a base for more open markets and international convergence of standards.

Muses

In the scenario “Muses”, biotechnology delivers in a big way (same arguments as “Morpheus” scenario) throwing up new cures and prevention techniques and opening up new opportunities for the medical industry. However Governments show strong resistance to deregulating the industry. They opt for keeping controls on the insurance sector in response to the clamour for upholding social values and moral standards. Profiling and selections, at least those based on genetics, are not approved.
Ethical discussions also contribute to preventing markets from opening up in a big way. Regulations are very restrictive rigidly limiting what can be screened, profiled, insured etc.

Serene

This scenario is extension of status-quo where biotechnology does not take off because it is not still widely accepted and adopted or fails in delivering the expected successes. In the same time regulations remain close and quite restrictive in most of the advanced countries.
Therefore, health care and health insurance industry are still localized. The industry picture is not fundamentally different from the current generalized situation and is quite calm (hence the name “Serene”). Marginal benefits due to globalisation might result in slightly reduced medical costs. In order to achieve better financial capabilities, consolidation processes continues but in a painfully slow manner. Because of its endemic fragility insurance industry may be shaken up by dramatic events like new medical pandemic medical threats, increased bio-terrorism threats etc.

To download the presentation in PDF please click here.