The use of wearable technology has been on the rise in recent years, from step-counting to measuring sleep. Many industries have begun to embrace this technology, with increasing interest in how wearables are being used in life insurance. More importantly, how can and should they be used going forward? And what caveats should we be aware of?
In November 2018, a panel of speakers explored the wearables market and its broad ranging implications for our industry at an Insights session at the Actuaries Institute. They key insights drawn from the discussions were:
- Wearables can be used as a customer engagement tool, and we can learn from overseas insurers who appear to be making further strides in this regard than Australian insurers
- Data being generated by wearables is beginning to be used in wellbeing programs to drive behavioural change in policyholders via a shared value model
- The data can also be used to enhance underwriting and medical risk assessments
- While the data is becoming more reliable as wearable devices improve, it is imperative that the trust of consumers to share their data is earned, and that we constantly evaluate where and how we as actuaries believe we should be playing in this ecosystem.
How wearables can be used as a customer engagement tool
MLC’s Sarah Korman kicked off the Insights Session by surveying the current wearables tech scene (including the explosion in wearables’ penetration in recent years – shown in Figure 1 below), before looking ahead to projected growth and potential future technological innovation in the area. She reflected on the consumer perception of wearables and challenged us to think beyond just smart watches and fitness trackers.
Figure 1: Wearables device penetration (2013-2017), from Sarah Korman’s presentation
Sarah also provided some insight into how MLC’s gamified ‘On Track’ wearables program adds value to the business. Under the program, MLC provides discounts of up to 5% of premium for engaged customers who monitor and manage their steps. She highlighted three key benefits for the insurer:
- Increasing customer engagement and therefore retention – having more meaningful and regular engagement with customers is key to retention;
- Incentivising health improvements for customers (both as active lives and when on claim) – with consequent benefits for both the insurer and the customer; and
- Collecting Big Data for dynamic underwriting and claims modelling.
MLC’s program is not unique in the Australian market. Here the concepts are still developing and most local ventures might be considered rather experimental at this stage. Conversely, insurers in some international markets have aggressively pursued wearables integration, even to the extent of full adoption. For example, John Hancock in the US now only sells interactive policies with fitness data tracking. This strong market leadership in the context of high projected wearables growth certainly provides some food for thought for insurers here in Australia.
The role of wearables in wellbeing programs
Ryan Chen of AIA explained the concept of shared value insurance and how AIA is currently using wearables in its Vitality program:
- to collect data and create a feedback loop using rewards/incentives; and
- to create a more proactive role for insurers (aiming not only to protect in times of need, but to proactively help create healthier, longer, better lives). This is consistent with the concepts I raised in this Institute video introducing our Big Data Green Paper back in 2016.
Ryan also showed statistics that demonstrated the increase in physical activity from Vitality members who engage in the program.
Using biometric data to enhance underwriting and medical risk assessment
Dr Monique Esterhuizen from Hannover Life Re reiterated the high growth projections on the wearables tech market in addition to describing the vast number of medical inferences that may be drawn from wearables data.
In particular, she emphasised the ability to use the data for early detection of health deterioration and for biometric risk assessment in a dynamic underwriting process, moving away from long upfront medical disclosures towards regular behaviour/risk monitoring. This requires ensuring that the data and biometric measurements are validated appropriately and use gold standard measures!
As illustrated in Figure 2 below, wearables can measure biometric risk factors (influencing morbidity and/or mortality) across a multitude of areas, and Dr Esterhuizen took the audience through some fascinating clinical evidence on each area, demonstrating the predictive nature of certain measures:
Figure 2: Useful biometric data, from Dr Esterhuizen’s presentation
Perhaps of most interest in the current environment is mental health. Dr Esterhuizen believes that wearables’ data may be able to identify (with up to 80% accuracy) and predict a variety of mental health issues such as depression, anxiety, PTSD, and many more.
Additionally, wearable tech may facilitate the development of robust, objective, data-based definitions of mental health (and other conditions), helping with product design (my thoughts extend to flexible and dynamic products), profitability, definitional accuracy, early intervention (with consequent reduction in claims) and ongoing dynamic underwriting.
What is the real value of wearables to life insurers
Finally, Dr Sally Phillips from TAL stressed the need for responsible implementation and usage of wearables as well as the data that they generate. We should not sideline the “unhealthy” lives who are unable to use or benefit from wearables. She also urged us not to forget the core responsibility of life insurers – to protect against financial loss, rather than to take the place of medical practitioners.
On the implementation side, insurers should ensure that adequate due diligence and reflection is undertaken before utilising biotech – a point that both Doctors made strongly. This assurance process would involve an obligation to verify the medical backing of any tools utilised through clinically recognised, peer-reviewed, evidence-based studies.
Care also needs to be taken with the data collected from wearables, both in regards to cybersecurity and also more broadly. Insurers must consider who owns the data, how much consent is given, whether the consent active and informed, what can the data be used for and whether that data is producing the best measure of health (eg. number of steps is perhaps not as good a measure as heartrate intensity).
Interestingly, Dr Phillips also advocated for viewing health as multi-dimensional, beyond just physical and mental. She noted that both social and financial health might impact your physical and mental health, leading to a holistic view on health. For example, someone who is struggling financially may find it challenging to move away from cheap fast food to less affordable, healthier options. Therefore, it is necessary to understand the full picture before nudging a policyholder one way or another.
A global example of this that I have observed is Discovery South Africa, the insurer that is behind the Vitality wellness programs globally. They have recently expanded this physical wellness concept by launching what they call the world’s first behavioural bank, using behavioural economics to motivate and reward you for banking well (i.e. for being financially healthy).
The Insights Session provided some relevant context to the expanding and exciting world of wearables and their use in life insurance. There are opportunities aplenty for using these devices (and the data they generate) to innovate and disrupt, but insurers must tread this minefield with caution. Any decision should be made with the end consumer in mind, wearing the hat “would I be happy if this made its way onto the front page of the newspapers?” (particularly relevant given the strong current conduct focus).
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