At San Diego's Health IQ, selling life insurance to healthy people comes with the added perk -- or punishment, depending on your outlook -- of practicing what you preach.
The firm, which has applied data science to craft life insurance plans that reward fitness freaks and diet do-gooders, also encourages its 140 employees to stay active and avoid sugar; there's a gym smack dab in the middle of the office and a no-candy policy, for instance.
It's this philosophy of incentivizing better choices that co-founder and CEO Munjal Shah, 44, applies inside and out of the company in the hopes that Health IQ can actually affect changes in lifestyle.
His startup, founded in 2013, seeks to make the world a healthier place one life insurance policy at time. Runners, weight-lifters and even vegans are offered life insurance plans at discounted rates, anywhere between 4 percent and 33 percent off standard monthly fees. Rates are based on scoring well on a randomized 30-question health quiz (out of 3,000 possible questions) and submitting additional data, such as weekly running mileage as verified by an approved smartphone app.
Thus far, Health IQ has convinced three carriers -- SBLI, Ameritas and Assurity -- to let it sell custom policies, underwritten by science and big data. The company got more than 1 million people to take its online health test and, after three years, looked at which of the respondents were still living or not. Health IQ gathered enough data to determine that those who were deemed health conscious died 41 percent less over this 3-year period than those who were not.
Enter the Health IQ life insurance business, where the basic idea is that people who take responsibility for their health should be recognized for their hard work. Or, in insurance terms, the health conscious die less and should get lower premiums.
It's the inverse approach most often taken by the insurance industry, where people are penalized for their poor choices, not necessarily celebrated for good ones. The Health IQ way started with a simple thought, inspired by Shah's own battle with the bulge and the recognition that you can't force people to get off the couch.
"What if we try to improve health by celebrating the people doing it right instead of harassing people who are doing it wrong?," Shah said.
Validating the idea is the Bay Area powerhouse Andreessen Horowitz, which just led a $35 million financing round, announced recently, in Health IQ. The venture capital firm, famous for making investments in Facebook, Slack and Airbnb, is backing Health IQ's life insurance play alongside other recognizable names, including Charles River Ventures, First Round Capital and Foundation Capital.
To date, Health IQ has raised $81 million in capital.
"(Shah) proved through data that people living a healthy lifestyle live longer," said Charles Moldow, general partner at Foundation Capital and a Health IQ board member.
That gives the company an edge, he explained, because the data is proprietary and is being used to create a new underwriting formula.
Of course, there's also Shah's entrepreneurial pedigree. The UCSD computer science graduate has sold two companies to two different tech titans: Like.com to Google (for a speculated $100 million) and Andale to Alibaba.
Then, there's the fact that Health IQ is part of an insurance tech boom.
"It's definitely been a hot area for financial technology over the past couple of years," said Matt Wong, a senior analyst with finance-tracking firm CB Insights. "By and large, we're seeing a lot of startups try to create new digital brands centered around user experience."
Insurance tech startups pulled in $985 million in financing during the second quarter of this year, and experts anticipate continued investment, and perhaps overcrowding, as tech companies race to make over the front-end of the highly regulated industry. Even more traditional carriers are anxious to participate in the trend, establishing their own corporate venture arms or digital brands, Wong said.
Of course, Health IQ is narrowly focused on the already health conscious -- runners, cyclists, swimmers, vegans or even people successfully managing a chronic disease. Still, the startup estimates that more than 50 million people in the U.S. fit into this category. Board-member Moldow believes that it's a niche worth tens of billions of dollars.
Since making its first life insurance plans available 22 months ago, the company has sold more than $5.3 billion in coverage to customers, banking a commission on each policy. But that's just scratching the surface. Most athletes probably aren't aware that they can save money on a life insurance policy, Shah said, and Health IQ has ambitions that extend to long-term care and disability insurance. Hence the $35 million cash infusion, which Shah and his investors hope can help fuel growth at an even faster pace.
"Today, nobody searches for 'life insurance for runners.' Awareness needs to be created for this category," Shah said. "People should know that when you finish a marathon you should refinance your life insurance."
Customer acquisition is, indeed, the biggest hurdle. Not only is Health IQ trying to turn around the trend of fewer consumers purchasing life insurance than in years past, but it's also competing with carriers with massive advertising budgets, Wong said.
The former challenge could also be seen as the startup's greatest opportunity.
"You can make the argument that life insurance is a fundamentally important product, and also argue that it hasn't resonated yet with demographic shifts in how millennials are used to buying products," Wong said.
It follows that a life insurance company that talks tech and appeals to health-minded young people could feasibly make inroads with first-time insurance buyers.
Internally, at Health IQ, staffers at both its San Diego and Bay Area offices are encouraged to walk the walk. The whole company participates in 30-minute workout sessions, in the gym at the center of the office, four times per week. Sugar is also a banned substance, meaning that while the company won't monitor what employees eat, it also doesn't make sweets and sodas available in its break areas.
And, in a perfect world, a company that supports healthy lifestyles internally will have more success advocating for and attracting health conscious customers.
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