Nudging to stay healthy!

As health care costs ratchet upwards, insurance companies have been experimenting with various strategies to keep them under control. The most interesting approaches involve the use of insights from behavioural psychology to nudge people into staying healthy so that their treatment expenditures are minimized.

The Economist points to the success of South African insurer, Discovery Group, with its "Vitality" program that applies the "air miles" model to health care. Discovery has risen from obscurity to become South Africa's largest health insurer in less than two decades.

"You earn points by exercising, buying healthy food or hitting certain targets. You rise through various levels, from blue to gold, as you accumulate points (rewards are adjusted to your starting level of fitness to give everybody a chance of making progress). And you are given a mixture of short- and long-term rewards ranging from reduced premiums to exotic holidays.

Discovery has formed alliances with a host of companies to provide rewards linked to your 'vitality level'. Pick ’n’ Pay, a South African grocery chain, provides discounts of up to 25% on 10,000 'healthy foods'. Airlines such as Kulula offer discounted flights. Discovery can measure whether people actually go to the gym, rather than just join, by swiping their membership cards. It says it has solid evidence that participation in the programme more than pays for the rewards: active participants are less likely to fall ill and, if they do, they spend a shorter time in hospital."

The "air miles" model of incentivization has been deployed in other industries, "including a credit card that offers discounts linked to well-being and car insurance that offers cheaper petrol to people who drive safely (a telemetric device installed in your car monitors aggressive driving, like harsh acceleration or sharp cornering)".