Wearable technology – including smartwatches, clothing and jewellery – appears set to boom among consumers in 2015 and beyond, presenting both huge commercial opportunities, but also reputational and anti-selection challenges for life and health insurers globally.
An underwriting relationship manager at a global insurance company tells Life Insurance International the global market in wearable technology (also known as wearables) is predicted to at least quadruple over the next 10 years and one of the largest sectors in this space will be health and fitness, so there are clear links with, and opportunities for, underwriting life and health policies.
On a similar note, asked when life and health insurers are likely to use data from wearable technology data for underwriting, a practitioner at a major Swiss insurance company expects to see plenty of trials over the next 18 months. And over the next 5 years, "it is likely to be widespread in one format or other".
In his view, insurers may encourage consumers to wear devices that track their daily activities, for example steps taken, exercise done, time sleeping, in the belief that ultimately some will change behaviours. However, he cautions that it remains to be seen how many consumers will change their behaviour.
"Broader medical insights from wearable devices will provide plenty of challenges to underwriters in terms of just how meaningful changes are over time from an insurance perspective," he says.
Looking forward, one chief underwriter says: "I suppose the question is if we do use this technology, how it will shape insurance products and pricing in future. I think wearable technology definitely has a role in attracting better risks and can be a proxy for someone who is very healthy."
Therefore, while wearable technology presents life and health insurers globally with significant opportunities, the industry must reconcile this with the reputational, anti-selection and privacy risks associated with it.
A principal in the insurance practice at the US research company concurs with other practitioners that life and health insurers are concerned about privacy and regulatory issues with wearables data.
However, he says these issues should be resolved in the next year or two, and early innovators will likely soon after develop products specifically for users of wearable technologies.
"Insurers can win wearable users' trust by limiting use of the data to providing incentives and not as a disqualifying criteria, but instead being very transparent about how the data will be used, and providing protection against misuse of the data," he advises.
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