Articles - Survival of the fattist


It’s only natural for any company to seek competitive advantage, and for insurers this is no different. What if your firm could attract more customers and higher annual premiums, but pay less out in claims? Surely you’d do it? The good news for insurers is that this is already possible. Consumers who previously were put off from protection insurance by intrusive health and lifestyle questionnaires are now giving their personal data away to wearable device and mobile phone fitness apps such as FitBit and Strava.

 By Jon Dean, Head of Retirement Strategy, Altus Consulting

 In return for this they get the ability to track their own health or compete to be the fittest in their sport. US insurer John Hancock is exploiting this and has decided to sell life insurance to customers as an option who are willing to track their health on wearable devices.

 Will we see this model take off in the UK? It seems likely. Hancock has built its wearables proposition in conjunction with Vitality, a protection provider which already has a strong profile in the UK as well as South Africa. Consumers have already bought into the wearable ecosystem, with predicted global sales of 125 million wearable devices in 2018 and potentially 800 million in use by 2020.

 Coupled with the built-in capabilities of mobile phones you have a powerful driver for uptake of wearable-linked insurance.

 The advantages to some consumers are clear: lower protection insurance premiums based on taking proactive steps to improve their fitness – something that wearable-users are already inclined to do. According to Vitality, wearable-users live between 13 and 21 years longer than ”couch potatoes”. But as we know, where there are winners there will be losers and these will include people who are not necessarily able to be more active. People with existing disabilities or conditions, and those without the budget for an Apple watch may find themselves confined to an increasingly small selection of firms prepared to insure them. These same firms will be left with an insured portfolio disproportionately swayed towards higher risk customers and will have to charge much higher premiums to cover their costs.

 An Equality and Human Rights Commission study notes that disabled people are only half as likely to be in work as able-bodied people, and on average are paid between 7% and 13% less. If wearables insurance becomes mainstream, this indicates that those with physical disabilities may find themselves priced out of the protection market, while Strava-mad athletes reap the benefits. We risk undermining the fundamental principle of insurance - the pooling of risk – at the expense of some of those least able to pay the price.

 With the FCA keen to ensure vulnerable customers are not treated unfairly, over-dependence on biometric data risks crossing the line into disability discrimination.

 But there is another way. Fiona Macrae recognised this when, in 2005, she couldn’t find travel insurance after recovering from breast cancer. She responded by setting up InsuranceWith.com. This service was specifically designed to deal sensitively with customers with pre-existing conditions, and the firm works to provide affordable insurance based on the actual risk rather than the perceived risks associated with each condition. In short, Macrae has identified a segment of the travel insurance market at risk of exclusion and created a new niche product; insurance which genuinely treats the customer fairly.
  

 1. Equality and Human Rights Commission: Research report 107: the disability pay gap, S. Longhi,
 Institute for Social and Economic Research, University of Essex
  

Back to Index


Similar News to this Story

Can AI led conversational commerce change insurance forever
If you’re still following the minutiae of Brexit, if you know exactly what the Backstop entails, and if you understand how the UK’s proposed departu
The diversification trap and how to avoid it
Pension schemes often focus on maximising diversification within a scheme’s governance constraints. However, if this pursuit of diversification goes t
Signs of demand pressures in the bulk annuity market
Another record breaking year in bulk annuity market is on the cards, but what does this mean for schemes and sponsors eyeing future transactions as pa

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.