Bitter pill: How a $2 product fooled the Chinese insurance industry
It all started with the desire to make people healthier by offering financial incentives. What could go wrong?
Can creative innovation backfire? Learn from the Chinese insurance companies.
To promote healthy and active lifestyles, some insurers in China started offering discounts to people who would complete a certain number of steps every day on their wearable devices/phones.
The idea was to keep people active and reduce the ultimate claim ratio by organically helping people improve their health.
The added incentive of lower premiums was supposed to be the lubricant that greased the wheels and got people moving.
But, something strange happened.
In lockstep, the biggest stores in China such as AliExpress were flooded by a device called 'phone cradle'!
What's a phone cradle, you ask?
It's basically a device that continuously shakes your phone/wearable back and forth to add fake steps to your monitoring while you sit on the couch and binge on shows!
Watch it in action here.
They cost as little as $2. That's it. That's how much it takes to fool an entire industry.
If you are too lazy to even order one of these devices, there are other DIY hacks such as tying it on your pet's feet or taping it to the ceiling fan!
Now, these devices are selling like hot-cakes in markets across the world (including India!) even as the insurance industry marches on with its push towards activity-tracking.
What's next?
Some suggest that insurers should increase monitoring further to ensure nobody cheats the system.
This includes suggestions ranging from installing cameras to track exercise to peer audits where people work out together and report the other person's actual activity.
What's the problem?
Humans are evolutionarily wired to find workarounds.
There's no CCTV camera in the world that can't be broken by brute force or by simply cutting the power cord. The higher the wall, the more tempting it is to breach.
Increasing surveillance layers only increases the number of potential loopholes.
What's the solution?
Marketers and product owners need to move beyond gimmicks. Learning to trust one's customers is the first step in establishing a rapport.
An insurer that gives premium discounts or adds disease coverage that wasn't earlier covered based on self-reported medical tests is more likely to be trusted in the long run than the one trying to get inside people's lives by making them install apps, track their location, and count their steps.
Treat customers like the adults that they are. Or they will continue to behave like children fooling their nannies for more TV time.
Would you report your progress honestly if there were financial incentives to misreporting?