Wearable devices (those worn by consumers as accessories or implants) have been of interest to more than a handful of industries in recent years. The opportunities and possible uses so far seem positive and limitless.
What does this mean for the insurance industry and where is this technology taking it? Some life and health insurers are building on positive brand perception through the promotion of healthier lifestyles by way of these wearables. What can we learn from those endeavors?
Information from sensor-based devices, such as a fitness tracker worn as a bracelet, has the potential to change the way insurance companies do business. Knowing things about a policyholder — such as their daily activity levels, sleep patterns and heart rates — is extremely valuable to an insurer. They can provide insight to these companies in a way that has never been seen before. Whether these numbers are from a potential or a current client, this information presents an opportunity for increased engagement for those in both operational and client-facing roles.
It is now possible for a wealth of information to be at an insurer’s fingertips, equipping advisors with an increased understanding of potential client needs better than ever before. Having more detailed and personal information about a customer contributes to long-standing relationships over time and allows for more customization of products that can be offered.
It is also very telling when looking at user habits. Is the person trusting and willing to use the device, or more hesitant? Do they show loyalty by sticking to the prescribed process or quit halfway through?
In addition to increased customer engagement, there is also an opportunity for enhanced underwriting with the data provided by wearable devices. The results would not only lend to a quicker underwriting decision, but perhaps increased access for individuals who have pre-
existing conditions. For example, a diabetic who now has a record of well-controlled glucose levels, thanks to data gathered by an implanted glucose monitor, might receive higher coverage not previously available under average risk factors.
Reduced costs to the insurer are also ultimately a result of this monitoring of various health measurements. Wearable devices used in conjunction with a proven wellness program (boosted with consumer-friendly incentives) result in heathier clients and policyholders, and therefore claim numbers should decrease over time. As this technology becomes more prevalent, more people will have greater ability to manage even chronic diseases, which in turn provides real value to both the insured and the insurer.
We also must consider the challenges that come with the adoption of wellness programs backed by wearables.
First, sustaining policyholder engagement in these programs is the biggest and most critical hurdle to overcome. Second, there are two sides to this data collection relationship that may deal with trust issues — the consumer trusting the insurer with their data, and the insurer trusting the consumer to not cheat the system. Finally, cost-effectiveness of these programs can be difficult to ascertain for the first three to five years, making it difficult to justify the initial outlay. Companies will need to be persistent, prepared and patient when incorporating these types of programs.
There is still more experimentation and growth potential for wearable technology in the realm of insurance, but there are a few lessons learned thus far to keep in mind when considering wellness and incentive programs with wearables.
» Relatively short programs work best. Efficiency begins to fall off with anything longer than eight to 12 weeks.
» Engagement works better with group policies than with individual policies. Group activity can bring with it the appeal of either teamwork or competition.
» Wellness programs in Asia are still a new concept and therefore may need more time to become as popular as in the U.S. and South Africa.
» Customers from the U.S. are most likely to embrace wearables as they relate to health insurance.
As the need for data increases, so will the types of technologies used to collect it. Wearable devices present a large opportunity for life and health insurers who find the right mix of engagement. Patient adopters of wearables will be taken to a place where ultra-customized, fast and profitable sales are the norm.
Larry Hartshorn is corporate vice president and director, international research, for LIMRA and LOMA. He previously was Aetna’s executive director for Greater China. Larry may be contacted at [email protected]