Cigna-Express Scripts deal continues revenue diversification in insurance

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The news that Cigna will acquire Express Scripts for $67 billion implies a lot about the impact of an increasingly digital world on insurance. Specifically, the healthcare system -- and its component insurance market -- is under a lot of duress as government, business and consumer interests grapple with rising costs.

In fact, Cigna's deal is the third seismic announcement in the past few months for the sector; it follows CVS' buy of Aetna in late 2017, and Amazon, Berkshire Hathaway and Chase forming a healthcare consortium at the beginning of 2018. Clearly health insurers see massive disruption on the horizon.

In many ways, Cigna tying up with Express Scripts will yield many similar benefits to the CVS-Aetna deal from a digital standpoint: The companies get access to increased amounts of data and a number of customer-interaction touchpoints, which will theoretically allow them to innovate new products and services leveraging both companies' strengths.

"The combination accelerates our growth strategy by expanding customer choice, deepening relationships with patients and providers and delivering greater personalized value," Cigna president and CEO David Cordani said on a call with investors discussing the deal. "Customers will have the flexibility to access health-engagement services in the way that works best for them, all delivered in an open-architected matter to maximize choice for our customers and deliver truly personalized solutions."

But tucked away later in the call was an interesting tidbit from Cordani's peer, Express Scripts president and CEO Tim Wentworth. In his introductory remarks, Wentworth said that Express Scripts would continue to work with other health plans, and "maintain guardrails to protect client data and preserve competition."

That dovetails interestingly with some news out of other lines of insurance business last week, about Allstate's Arity division and MassMutual's LifeScore Labs unit. Both announcements indicated that the startup divisions were looking to work with other carrier partners, besides their parent companies, to build momentum behind their innovations. It shows insurers thinking differently about the value of their digital intellectual property than they have in the past.

Cigna's buy isn't quite the same as it developing pharmacy-benefit capabilities itself and then selling those capabilities. But Express Scripts is now its property, and with both companies stating that they want to combine their areas of expertise to fix a broken healthcare system, the motivation is similar. Both MassMutual and Arity execs said that they aren't so worried about their data-driven scores getting out in the market, as much as they are excited to help usher in a new era for auto and life insurance.

As insurers face pressure from technology companies and changing customer expectations, they're beginning to look around for ways to keep their heads above water in a new world. We can expect to see more initiatives that diversify revenue streams, whether via M&A or internal development, down the road.

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