The Future is Now: Wearables with Insurance

The popularity and variety of wearable devices continues to grow and evolve. Initially, wearables were either chest straps to monitor heart rate or pedometers to track steps. Then came the next wave of fitness trackers and smartwatches, which have gone through many iterations and new styles. 


According to International Data Corporation, around 125.5 million wearable devices would be shipped worldwide in 2017 and the market is projected to double by 2021, as reported in Wearable Technologies


Today’s wearables are able to collect a wealth of personal health data with greater accuracy than ever before. Putting this data in the hands of consumers can empower them to take charge of their health and learn more about their personal fitness. Now, we’re looking at new wearables that will go beyond the wrist and how those wearables will be integrated into consumers’ lives in new and useful ways.


Interactive Insurance 


The use of wearables in insurance is a fairly new idea but it is catching on fast-- it’s called ‘interactive insurance’. Just Google “Wearables” and “Insurance” and you’ll read about companies both large and small are offering wearable devices along with their policies. This benefits both the consumer and insurer. For the insurer, wearables offers unprecedented access to accurate health data from customers. This allows insurers to mitigate risk, get an accurate assessment of their customers’ health, and offer rewards and incentives if customers maintain good health or show improvement if they are in poor health. For the consumer, they receive a free or low cost device and are able to get it replaced if it breaks or malfunctions. Perhaps best of all, consumers have even more motivation to stay or get in shape with the offer of rewards, discounts and other incentives. 


Beyond the Wrist 


Let’s face it-- some people don’t like to wear watches of any kind. Wearable have already gone beyond the wrist. Wearable items such as armbands and earbuds with heart rate sensors are now available. Wearable options will continue to expand to other forms including clothing or undergarments with heart rate monitoring sensors sewn in. This provides a discreet option for people who, for whatever reason, do not want to be seen wearing a device. The hurdle with clothing is that the sensors will need to be waterproof so the items can be washable.


As items in the wearable space continues to grow beyond the wrist, consumers who previously may not have had an incentive to use a wearables will come to see using a wearables as a practical choice if insurers offer the devices with policies in exchange for rewards and benefits. 

 

A Subscription Model for Purchasing Wearables 


In the near future, wearables will be offered on a subscription model rather than a one time purchase. Think of all the products consumers purchase by paying a monthly fee-- cars, smartphones, household appliances, etc. It’s likely we’ll see wearables sold this way, too. The subscription model makes wearables accessible to an even broader swath of the population because more people can afford a small monthly fee than a few hundred dollars at once, particularly for more expensive wearables such as the Apple Watch. 


Customers will still have the option to purchase a wearable outright, but there will be perks to the subscription model-- pay a small monthly fee and get the device replaced and updated when needed. With a subscription model, customers will always have a wearable device. 


This is good news for both consumers and insurers. By selling wearables using a subscription model, we’re likely to see a greater number of people interested in wearables in the near future. 

 

The Value is the Service 


Many of today’s wearables offer a technology feature set, however many features have become commoditized and more is not necessarily more value. The true value is in the applications and services that deliver end value propositions such as tools that provide personalized guidance and insights on how much activity wearers should be doing. 


One of the most important reasons customers purchase wearables is to protect their health through monitoring their personalized data and working toward improving that data. If insurers can offer incentives to customers who improve their health, such as lower policy costs or other perks, customers are more likely to use the wearable and also be willing to share some data. 


Accessing health data from consumers who receive a free or low cost wearable in exchange for possible benefits and perks presents a great opportunity for insurers to mitigate risk, offer more tailored products based on customer health data, and engage and retain customers with rewards for maintaining their healthy lifestyle or improving an unhealthy lifestyle. 

 


Nipping Privacy Concerns in the Bud 


Insurers can assuage privacy concerns by clearly explaining its privacy policies and data collection practices. Insurers should explain what data is shared between consumers’ wearables and the insurer, and what data is aggregated or non-identifiable at a personalized level. Consumers may be more likely to share data if the information shared is limited, if there are adequate incentives to share (discounts, perks, etc.), and if insurers’ privacy policies are transparent. 


We conducted a survey asking customers about privacy concerns. Two main concerns around sharing health data with insurers were, 1) a fear of premium hikes or denied coverage, and 2) health data being sold. Insurers can address this up front by explaining privacy policies and informing customers that exercise data is not very personal, so the customer would only benefit, not be penalized. 


 


 

Incorporating wearables into insurance offerings is beneficial for both insurers and customers. With the proliferation of all sorts of wearables devices, more consumers can access these devices to improve their health and receive insurance discounts. While insurers can benefit from the many possibilities wearables bring to their industry by offering insights into customers’ health and the chance to create products more aligned with consumers’ wants and needs. 


 


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