SPOTLIGHT ON DIGITAL HEALTH

Do digital health and wellness businesses lack essential insurance coverage?

70%

of businesses have coverage for only one or two key risks.

The vast majority (85%) of digital health and wellness businesses say they know what insurance cover they need – particularly larger businesses with global operations.
Which risks are you insured against?

Confidence levels are high

  • Longer established businesses with higher revenue report the greatest levels of confidence in understanding their business insurance needs.
  • Companies in the life science and health technology sub-sectors are also notably confident (92%).
  • Businesses in the UK and US display strikingly high confidence levels (99% and 100% confident, respectively).

However, businesses in Asia report lower confidence levels with only two thirds (67%) very or moderately confident – and a third (32%) not very confident.

Lack of essential cover is striking

Despite these high levels of confidence, underinsurance in critical areas is worryingly high.

Across the digital health and wellness industry, over 66% of businesses lack cover for existential risks including:

  • Loss of personal medical data.
  • System failure or cyber hack resulting in bodily injury.
  • Medical malpractice due to the provision of remote care.

Over 60% of businesses also lack cover for:

  • Medical malpractice due to incorrect data.
  • Technology error resulting in bodily injury or financial loss.
  • System failure or cyber hack resulting in financial damage.

Although only 2% of businesses have none of these coverages, 70% of respondents have only one or two of their key risks covered.

We will explore the issue of underinsurance further in discussions with specialist brokers and our digital health clients.

85%

of digital health and wellness business leaders say they are confident they know what insurance cover they need.

Why is insurance penetration so low?

Although industry leaders feel they understand the risks they face and the insurance coverage they need, one of the reasons that insurance penetration is so low is the sheer complexity of risk in this industry.

Risk profiles are changing

Risks are evolving and the pace of change has been accelerated by the pandemic. For example:

  • Telehealth clients that previously covered the bulk of their risk under a product liability policy form have expanded their online presence because they are now providing more advice, exposing themselves to professional indemnity risks.
  • Disease testing and monitoring via track and trace or similar systems is now widespread and attracting the attention of hackers. This puts stress on service providers’ data privacy policies and technology product liability policies.
  • Laboratory risk is well established and was a standard cover but recently the focus has shifted to COVID-19 testing and the manufacturing and distribution of home testing kits, creating a more complex risk environment.
  • Motor manufacturers in the US and engineering firms in the UK, including Dyson8, adapted their production processes to make ventilators to treat COVID-19 patients. Others are supplying oxygen monitoring kits for patient use at home. Developments like these challenge insurers to think hard about the nature and the quality of the risk. What is the life expectancy of the business? Is it a sustainable risk? What limits do they want?

Risk picture is complex

In our experience, very few digital health businesses have a 360° view of the risks they face. The new and unique combination of risks within digital health creates a complex web of interconnected exposures that can be hard to get to grips with for brokers and insurers new to the digital health landscape.

The variety of organizations in this sector heightens this complexity. Healthcare and lifestyle professionals are well-versed in medical malpractice, bodily injury and professional liability exposures. However, many are unaware of the risks that arise when they move their business online, such as data privacy and protection, cyber risk, technology product liability and media liability risks.

On the other hand, technology businesses typically understand cyber and data breach liabilities and product liability, but may not be aware of the bodily injury, medical malpractice, or the professional liability risks they may face if the technology fails or malfunctions.

What does the future hold?

Looking ahead, ongoing pressure to innovate to achieve profitable growth is going to push the insurance ‘ask’ even harder. The creation of new digital health products and services, the adoption of new models including more remote working, and investment in technology and AI are all strategies identified by digital health businesses to sustain growth in 2021. Such developments, while essential to the future of the digital health industry, will add further pressure on the insurance industry to adapt and evolve new covers.