Rewards for a Healthy Lifestyle: The Impact of Reward Type and Timing in Pay-As-You-Live Pricing

Abstract

The emergence of pay-as-you-live (PAYL) pricing mechanisms in health insurance represents a promising development with the potential to reduce long-term costs for insurers via encouraging healthier lifestyles among consumers. PAYL plans reward consumers’ health-promoting behaviors with a discount on their insurance premium or with cash or non-cash bonuses. We conducted two experimental studies investigating the impact of reward type (discounts on insurance premiums, cash rewards, non-cash rewards) and reward timing (monthly, annually) on consumers’ health behavior intentions. Our findings show that consumers’ reward evaluation mediates the influence of reward type on consumers’ health behavior intentions. Evaluations of discounts on premiums and cash rewards are more positive than those of non-cash rewards. Further, monthly rewards lead to significantly stronger health behavior intentions than do annual rewards.