‘Beyond the regulatory boundary, “fairness” can be seen as an opportunity to generate value to both the enterprise and its wider community. Fairness frameworks can be aligned with corporate and brand values as part of the broader enterprise strategic and risk management framework.’
While the starting point for a recent report on fairness in health insurance is the regulatory consumer duty recently put in place by the UK’s Financial Conduct Authority (FCA), it’s clear that the paper is more interested in business risk and opportunity than in mere regulation. As this blog has long found, there are remarkable numbers among the challenges that modern business faces that can best be viewed through the lens of fairness – and many opportunities that can be uncovered by deploying that lens.
From those smart people at Milliman, the report, Fairness in UK health insurance: Developing a framework and best practices in health insurance, covers the full range of relevant issues. These include: fairness in the delivery of consumer relations, especially the treatment of vulnerable customers; fairness in the application of new technologies, including AI and algorithms; and considerations of structural biases in healthcare.
While the report is narrowly focused on health insurance, it naturally considers many of the wider fairness issues that apply in the field of health. Foremost amongst this is the sterling work of the wonderful Sir Michael Marmot (perhaps most accessibly in The Health Gap). Marmot’s consideration of the social determinants of health is reflected in this brief segment of the report:
‘With greater focus on protected characteristics, there has been a move to greater use of “lifestyle” factors as personal “choices.”
‘Certainly, smoking is widely accepted as a choice. Possibly exercise; but are postcode, income, occupation, education, children? Whilst at some point they may have been “choices”, at later points in life they may be fixed rather than changeable (or controllable).’
Marmot shows that many of these issues are not choices at all, but are the outcomes of inequalities in wider society. In brief, poor housing, work, education, income, are all among the clearest determinants of poor future health outcomes. Few of these are chosen, particularly in economies where meritocracy is failing. While people in poverty are unlikely to be accessing health insurance, Marmot’s analysis raises questions about how fair it might be to consider some of these lifestyle issues in the pricing of such insurance.
The use of technology in relation to healthcare is also a significant feature of the Milliman work. In particular, the paper argues that: “Greater personalised medicine and healthcare are likely to mean that trust, privacy and fairness are increasingly necessary parts of ensuring good customer outcomes.” Further, it is not enough that fairness be done, it must be demonstrable that it has been delivered in practice: “Risk-based pricing and underwriting approaches should be auditable with clear accountability and robust governance of decision-making processes.” It is certainly not enough to assume that AI or algorithms will generate fairness – as this blog has found previously, these technologies can encode and replicate pre-existing unfairnesses.
But it is in dealing with the FCA’s consumer duty requirements that the paper breaks most fresh ground. Given that these requirements are still new, we have not yet seen best practices developed. The paper is therefore one of the earliest detailed expositions that I have seen of how it might bite in practice, and what it may require of business. The Milliman summary of the application of the duty to health insurance seems clear and wholly appropriate to me:
“For UK health insurers this combines providing fair customer treatment and clear information with products that genuinely meet their needs. Particular attention is required to product design and suitability, customer communication, customer support and providing “fair value” as well as systems to track performance and make adjustments. There is also a need to give special attention to vulnerable customers.”
The paper later considers some of the detailed best practices that seem likely to be required under the duty, including “Being transparent with customers, in particular with terms and conditions around the inclusion or exclusion of pre-existing medical conditions, any moratorium and exclusion of any specific types of treatments (often highly complex, severe conditions)” and “Being clear and signposting these policies using laymen terms in the policy documentation so there is no ambiguity.”
And there is a particular need for fairness in the area of health insurance, a particular need for care regarding consumer duty. As the paper point out: “Almost all customers making health claims are vulnerable to some extent, with particular efforts required to meet the needs of the most vulnerable.”
Reinsurance firm Pacific Life Re was also recently inspired by the advent of the FCA consumer duty regime to consider the uneven distribution of insurance products across different communities. But its response is a rather more bluntly commercial one: “Understanding where communities are underserved, both within your own business, and that of the industry, offers an opportunity.” This has echoes of the fortune at the bottom of the pyramid thinking that seems slightly to have slipped from much business thought. But as the work of Citizens Advice continues to show, accessibility and pricing of various insurance products are not evenly distributed across consumer groups.
The Milliman paper also draws a fascinating analogy to the independent governance committees that are in place in the pensions provided by insurance companies. These IGCs have responsibility for overseeing the customer experience and defending consumer interests, with particular attention to value for money. The paper suggests that there is something in this model that would be worthwhile perhaps extending to health insurance: “We consider that these efforts can be a best practice governance framework for the health insurance sector and help tap into consumer groups’ understanding of “fairness” and how their expectations evolve over time.” IGCs are consumer champions in pensions – do we need something similar for other products?
For some, the very availability of commercial health insurance in the UK is itself a symbol of unfairness. Where there is (at least in theory) universal provision through our National Health Service, health insurance can often be seen as jumping the queues which seem the main form of rationing of that provision (and which can make its universality seem theoretical). But we have to recognise the reality of the use of health insurance – not least as a standard employee benefit from companies keen that their staff stay healthy. It is certainly better that it is deployed fairly than not. The Milliman paper provides a pathfinder for that, as well as useful insights into the consumer duty more broadly.
See also: Some thoughts on Rethink: build back fairer
Meritocracy’s unfair
FCA unpacks fairness: the Consumer Duty
The Consumer Duty II – the FCA further unpacks fairness
The failures of algorithmic fairness
I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour
Fairness in UK health insurance: Developing a framework and best practices in health insurance, Milliman, February 2025
The Health Gap: the Challenge of an Unequal World, Sir Michael Marmot, Bloomsbury, 2015
Build Back Fairer: The Covid-19 Marmot Review, Michael Marmot, Jessica Allen, Peter Goldblatt, Eleanor Herd, Joana Morrison. The Health Foundation, December 2020
Beneath the Surface: Serving the Underserved, Pacific Life Re, 2024
Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, CK Prahalad, Wharton School Publishing, 2004
Discriminatory pricing: Exploring the ‘ethnicity penalty’ in the insurance market, Citizens Advice, 2022
The Sense of Fairness blog 