Qantas has unveiled plans to target 2 to 3 per cent of the $19 billion Australian private health insurance market by introducing a new product, Qantas Assure, in partnership with health insurance nib, that will reward members with frequent flyer points for being more active.

Qantas Assure will allow members to earn frequent flyer points not just for paying their bills, but also for meeting targets through a wellness app that sync with mobile phones and popular forms of wearables such as Apple Watches and Fitbits when the policy launches in the first half of next year. The apps will log the number of steps taken in a day and then deposit Qantas frequent flyer points in member accounts.

Qantas said there were estimates around one-quarter of Australians now own a fitness tracker, but fewer than one in five Australians took the recommended 10,000 steps per day.

Members will be able to choose from a variety of daily or weekly targets depending on their lifestyles, with the number of frequent flyer points earned increasing with the size of the target.

Qantas chief executive Alan Joyce said the opportunity to earn points both from paying for the health insurance policy and through walking and running would be significant, although the actual rates won't be announced until the first quarter of next year. Eventually, points will be able to be earned for other forms of physical activity beyond walking and running.

"We think it will be one of the highest ways of earning frequent flyer points in total," Mr Joyce said.

Under the deal, Qantas Loyalty will provide its marketing, data and customer retention expertise while nib will provide health insurance, risk assessment and underwriting capability. The deal will involve the pair sharing equally the gross profitability of the health insurance plans, unlike typical Qantas frequent flyer partnerships under which it simply sells points to credit card issuers and retailers.

Qantas and nib will target a 2 to 3 per cent share of the private health insurance market on a revenue basis in the first five years, equating to as much as $570 million of annual revenue based on current market size of $19 billion. Based on nib's current 13.3 per cent gross profit margin, that would equate to around $76 million of shared profits for the pair, or $38 million a year for Qantas.

Qantas Loyalty was estimated to have earned up to $20 million a year from its partnership with Woolworths which lapses on December 31.

Qantas Loyalty chief executive Lesley Grant said the idea behind Qantas Assure came from members saying they wanted to be rewarded for leading a more active lifestyle. About half of those polled during research said they would be more active if they were rewarded.

"They also want to feel more engaged in the health insurance experience rather than just paying their monthly premium or making a claim," she said. "When members choose to combine the Qantas points they can earn from literally walking around the block with all of the other ways to earn, it becomes a very powerful proposition."

nib managing director Mark Fitzgibbon said the partnership with Qantas was one of the most innovative ones ever offered in the Australian private health insurance market.

"Qantas Assure's ability to meaningfully reward customers for leading a more active lifestyle not only strengthens the relationship Qantas has with its members, but has the potential to improve their health and wellbeing, and with that lower health care costs," he said.

Mr Fitzgibbon said the relationship with Qantas would allow nib to tap into its avid loyalty membership, which includes 11 million members. At the time the Medibank Private prospectus was issued in November 2014, nib was Australia's fourth-largest health insurer with a market share of 7.7 per cent.

The new partnership comes after Woolworths recently decided to drop Qantas frequent flyer points from its new loyalty program, although the pair remain in talks about a future deal. Qantas Loyalty's points selling capability could also come under pressure as part of a Reserve Bank of Australia review of the credit card interchange fee system, which has the potential to cap fees on points earning cards.

Mr Joyce on Monday reaffirmed Qantas Loyalty's target of increasing earnings before interest and tax by 10 per cent each year.