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Two years after Jacques Goulet took over the helm as president of Sun Life Financial Canada, the insurer is cutting health-care costs for customers through digital applications that steer users to lower-cost options, while also driving down market costs for some medical products.

In October, 2018, the company launched a website and mobile app called Lumino Health to connect Canadians and health-care providers. The app includes a directory of more than 150,000 practitioners – such as dentists, massage therapists, chiropractors and psychologists – allowing any user of the app (not just Sun Life clients) to compare provider costs, locations and ratings posted by other users. In addition, health-care providers can pay to provide additional information for their own business profile.

Lumino Health also offers digital “nudges,” allowing a robo online assistant to prompt Canadians on where to save money on certain medical devices and prescriptions, and notify users about balances remaining in their health and wellness spending accounts.

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A year later, Sun Life says its digital strategy is beginning to take off.

One of the biggest discrepancies in costs is in drug dispensing fees that can range from $3.99 to $12.99 depending on the pharmacy, Mr. Goulet said. Nudging clients on where they can refill a prescription at a cheaper rate than their original claim has begun to reduce clients’ out-of-pocket expenses and the cost to the overall benefits plan.

“An ancillary benefit of this undertaking is the potential for Sun Life to reduce expenses, improve margins and effectively bend its cost curve,” Steve Theriault, an analyst with Eight Capital, said in a recent research note.

Mr. Theriault said part of the benefit of the program comes from revenue obtained from health-care providers who want to be featured on the website, and part comes from the cost savings that are promoted by nudges.

Originally from Shawinigan, Que., Mr. Goulet spend the majority of his career abroad where he was the president of health and wealth for Mercer in both New York and Switzerland. After taking over the reins from Kevin Dougherty, who had run Sun Life Canada for almost seven years and moved into a digital health role before retiring last week, Mr. Goulet wants to change the perception that Sun Life is “just an insurance company.”

Part of that is the launch of a digital strategy aimed to stem the rising costs of health care for Canadians, while at the same time adding a stream of revenue to the books.

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As the amount of data and online claims increase the transparency on fees, large insurance carriers can leverage their scale to negotiate what’s known as product listing agreements (PLAs) – which are pricing agreements between insurers and providers – and in turn drive down the overall price of certain medical products for all consumers in the market.

For example, in 2018 clients were submitting claims for identical compression stockings that ranged in price from $90 to $220 a pair. Through a PLA, Sun Life was able to negotiate a cheaper wholesale price and steer clients to providers who agreed to sell the stockings for about $70. As a result, Sun Life recorded $20-million in annualized savings just for compression stockings and orthotics.

Although compression stockings making up less than 1 per cent of Sun Life Health claims, Mr. Goulet said the success will expand to other health products and services. “It’s easy to see the potential savings from this type of consumerism are very significant,” he added.

During a financial services conference in Toronto this past September, Dean Connor, chief executive of Sun Life Financial Inc., said the app was helping win new business from employers in the group benefits division, and he plans to monetize the digital tool across the company – and beyond Canada. Now he wants to push into the retail space, including insurance and wealth management.

“So, we’re pushing digital nudges to our retail clients in Canada," Mr. Connor said. "We want to take that model to our U.S. group [benefits] business ... and then we want to take it to Asia retail. That’s a huge thrust for us and we think we’re uniquely positioned. We’ve gotten off to a huge start in Canada.”

Building a health provider “ecosystem” is not unique in insurance, but analysts say the breadth and size of Sun Life’s network of 150,000 providers does make it stand out among the crowd.

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“When it comes to Canadian group benefits, Sun Life is way out ahead of the pack,” Mr. Theriault says. “It’s early days, but in our view this has the potential to be a sustainable digital ecosystem that drives market share, reduces churn ... and builds an even larger moat around Sun Life’s already oligopolistic market position.”

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