Growth opportunities for European health insurers with Marion Hämmerli

Many health insurers in Europe are struggling to achieve and maintain healthy, sustainable growth. Rising healthcare costs are accompanied by escalating healthcare consumer demand as regulatory changes and an explosion of partnership and business model options push disruption across the industry. McKinsey spoke with Marion Hämmerli, a partner in the Zurich office, about the growth options available to European health insurers.

McKinsey: Describe the current landscape European health insurers are navigating. What challenges rise to the fore?

Marion Hämmerli: News headlines are a daily reminder that healthcare systems in Europe are under pressure. A surge in demand that started during the pandemic continues, as does a shortage of healthcare workers and financing. And independent of the pandemic, the cost of healthcare has increased. From 2015 to 2019, healthcare costs in Europe rose 3.4 percent, according to McKinsey analysis of data from Eurostat and OECD, and are expected to increase further in subsequent years. In systems with insurance-based healthcare financing, rising costs translate into rising insurance premiums, which in turn can affect individuals’ access to healthcare and create political pressure on providers and insurers to reduce costs, especially in systems with mandatory public-insurance coverage.

Against this backdrop, many European health insurers have struggled to offer solutions that secure healthy, sustainable growth—that is, beyond growth from cost or population increases. Health insurance is typically a saturated market with high barriers to entry, given the regulatory complexity, and many European markets have seen limited disruption in recent years. The question for private health insurers is how to innovate—in terms of product offering, distribution, operations, or medical-cost management—in a way that increases the potential customer base and addresses rising healthcare costs.

McKinsey: What can European health insurers do to achieve sustainable growth going forward?

Marion Hämmerli: Insurers need to systematically analyze their options along the value chain to determine how best to differentiate themselves from competitors and create a next-level experience for customers. This review should include the health insurer’s product and service offering, distribution approach, and core operations.

In terms of products and services, the question is whether and how to design offerings in a way that answers real healthcare needs for customers and, at the same time, limits financial risks for insurers—for example, by building quality-enhancing and cost-saving elements into the product design. Options for European health insurers include changing the reimbursement logic for healthcare services or even deprioritizing indemnity products to pay healthcare costs in favor of lump sum payment models seen more often in the life insurance industry.

In distribution, the question is how to better reach customers on their healthcare journeys in a way that improves their experience and makes access easier. This could include targeted approaches to different customer segments and partnerships along the healthcare customer journey.

Superior core operations can also spur growth through not only improved customer satisfaction but also improved product economics.

McKinsey: Where specifically should European health insurers focus their growth efforts?

Marion Hämmerli: There’s no one right answer for every situation. But in general, we see four approaches European health insurers can use to differentiate themselves, address healthcare costs, and become more attractive to their customers: provider–insurer partnerships, ecosystem partnerships, cross-segment synergy, and core operations investments.

First, health insurers can seek provider partnerships or “forward integration” with provider networks. This approach goes back to partnership models between insurers and providers built in the United States, which has, of course, different regulatory frameworks than those in Europe. In those models, insurers and providers enter contractual agreements to align their incentives in a way that optimizes treatment paths and outcomes for customers at equal or even lower costs. These networks are complex to build because they require structured data gathering and KPI reviews, and their feasibility depends on regulatory contexts, but we see increasing interest in Europe among both insurers and providers to experiment with these models.

Another partnership approach is to engage in ecosystems, entering select partnerships with other players along the value chain to attract and retain customers through better customer engagement along customer journeys. An ecosystem approach enables health insurers to connect their offering—for example, as part of a specific product or for specific customer groups suffering from a particular disease—to service offerings they can attain from other players that are typically outside their own core competency. The ecosystem’s offerings can also be made easily accessible to customers on a single platform, such as an app, that they can access throughout their healthcare journey. This approach, when done right, can have the twofold effect of increasing the differentiation of the insurer’s offering—and thus customer attractiveness—and helping to manage healthcare costs by influencing customer behaviors. For example, ecosystem partners can collaborate in supporting and incentivizing customers’ healthy behaviors through apps that can track activity habits, support therapy adherence with regular reminders to take prescribed medication, and so forth—all of which can be considered in insurance premium levels and adjustments. While generally difficult to monetize, ecosystem approaches by health insurers have shown early signs of success and are now being pursued increasingly in European markets; Switzerland’s new platform Well is a recent example.

A third opportunity involves capitalizing on commonalities with other insurance segments, especially life insurance. Health insurers can benefit from synergies with life insurance in two ways. On the one hand, health insurance products built on the logic of life insurance products—with a one-off lump-sum payment instead of indemnity arrangements—can complement current health insurance offerings by increasing the financial flexibility of customers in cases of severe illness while also limiting the financial risk for insurers. Coverages of this kind are widespread in Asia, and we increasingly see them offered in Europe. On the other hand, there is an opportunity for health insurers to make a more strategic move toward an integrated health–life offering, based on multiple commonalities between late-life healthcare and retirement financing needs. Such an integrated offering can share resources in a number of areas, from distribution and customer advice to the use of health analytics for both health and life insurance coverage. Some players may even find opportunities to participate in building a broader health–life ecosystem approach for the senior population. 1

Finally, European health insurers could prioritize innovating their core operations through large-scale health tech and health analytics investments, which increase the efficiency of payer operations and can help improve product economics, respectively. By combining these investments with a third-party service offering approach, insurers can spread expenses for large-scale innovations and thus make them accessible to customers in a more cost-effective way.

1Pierre-Ignace Bernard, Piero Gancia, Elena Pizzocaro, and Luca Toffoli, “European insurance and the future of senior protection and well-being,” McKinsey, November 11, 2021.


Marion Hämmerli is a partner in McKinsey’s Zurich office.

The author would like to thank Isabel Eichwald-Neumann, Boris Körs, and Marc Krüger for their contributions to this article.

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