This entrance of wearable technology into the insurance industry world has triggered a revolution of sorts, around how life policy pricing and incentives are set. As this trend continues to evolve, it is changing the face of the conventional insurance model opening doors for both opportunities and as well as challenges not just from an insurer but also from a policyholder’s perspective. Today, we explore the impact of wearable technology on life insurance and what that translates to in terms of consumer behavior.
The Rise of Wearable Technology
Over the past decade or so, wearable technology — which includes items such as fitness trackers, smartwatches, and health monitors has exploded. These devices monitor several health parameters such as:
Steps taken
Heart rate
Sleep patterns
Blood oxygen levels
Stress levels
How Wearables Are Changing Insurance Pricing
What we are seeing essentially is an explosion of real-time health ass data being produced by more and ever smarter devices. Life insurance companies, which can use these data to sharpen their pricing models and incentivize healthier behavior among policyholders (spurred by the knowledge that if they clasp on a smartwatch it will cover part of them), have now caught onto the treasure trove.
Incentivizing Healthy Behaviors
Historically, life insurance premiums have been set with such factors as age and gender combined with more static figures like medical history (is this person a smoker?), etc. Wearable technology, however, adds a new dimension to this equation.
CONTACT has opened a new window into how we might use data from telemedicine and other sources to improve insurance pricing for the long term. In some cases, carriers reduce this uncertainty by allowing continuous premiums to be adjusted based on current health and other lifestyle information (in what is loosely called “continuous underwriting”) rather than merely the data available at the policy issue.
For instance, a person who regularly meets daily step goals has a healthy heart rate, and gets enough sleep might earn lower premium rates. Conversely, the data could determine higher rates for a sedentary lifestyle or poor sleep patterns as well.
Encouraging Wellness including the use of Wearables and Incentives
Beyond costs, several insurance firms are using wearable tech as the basis for incentivized programs designed to promote healthier living. These programs reward or discount doing healthy things based on compliance proving wearables data. Common incentives to earn:
Savings on premiums for hitting step or workout thresholds
Receiving bonus cash for hitting heart rate zones during workouts
Redeemable points on health and wellness products/solutions
Higher deductibles for crappier sleep patterns
Gesture: Insurers looking to incentivize policyholders with gamified health tech offering real rewards It offers a win-win for both policyholders, who could possibly be healthier and save money on insurance premiums with this new process, whereas insurers lessen their risk.
Challenges and Concerns
As fantastic as the integration of wearable tech has been in a life insurance setting, it is not without its challenges and pitfalls.
Privacy Concerns
There are important privacy issues too, around personal health data. In addition to other data security challenges, insurers are tasked with meeting complex regulations like the US’ HIPAA and Europe’s GDPR which regulate how they should be managing sensitive health information.
Data Accuracy
This is not always a 100% accuracy rate for wearable devices. Dependent on these mistake-prone data has resulted in unjust premiums.
Equity and Accessibility
Wearable technology is not for everyone. This can create a two-class system wherein those who wearables reap benefits — and potentially gives insurers an advantage with less risky participants while at the same time shafting lower-income people or individuals who treasure their privacy.
Long-term Health Impacts
Although wearables may facilitate short-term healthy behaviors, the long-term effect on health outcomes is not well understood. Whether such data—as provided automatically by wearables or collected more persuasively from purpose-built medical devices—can reliably map to reductions in the mortality risk insurers will seek will need careful evaluation.
The Future of Wearables in Life Insurance
As wearable technology gets smarter and more integrated with the available life insurance solutions, its role will probably increase. Of that, we may have:
Advanced health tracking (e.g. CGM, Disease detection)
Compatibility with other IoT devices for a broader overview of how you live and the state of your environment
Prognosis of Health Risks Using Wearable Data with AI
Tailored products Individual health Rich in benefits/output qualities
Conclusion
On the life insurance side, this represents a radical departure in pricing policies and rewarding healthy behaviors as never before. While this trend creates tremendous opportunities for new forms of personalized and adaptive insurance products, it also brings challenges that the industry must overcome.
However, as a consumer, you should be aware of the impact data sharing could have on your insurance premiums. So if you’re thinking about going with a wearable tech policy, read the terms carefully, make sure to understand just exactly what gets done with your data, and consider whether or not this is something that works for how you manage your health.
The future of life insurance is bound to be far more personalized, data-driven, and interactive than it has ever been. With the more and more sophisticated technologies that can be built into such wearables, therefore we have no doubt individual body data will inform a large chunk of this future — which ideally leaves us with healthier policyholders and indeed could help bring savings for insurance companies.