The Effect of Wearables on Life and Health Insurance

by Emerson McCuin on 2017-10-25 4:55pm


Wearables are a big business. Millions are using wearable technologies to track bio-data and activity levels to improve their health. With $15 Billion in sales in 2015 and an expected growth to $29 Billion in 2019, the trend of using wearables to measure personal fitness and overall health is expected to continue.

Fitness trackers, such as the Fitbit, allow wearers to continuously monitor their heart rate, sleeping habits, and even VO2 max—an important metric of cardiorespiratory fitness. The data collected by these devices could have a profound impact on the insurance industry. Wearables have already come to the attention of the nation’s largest health insurance provider.

Earlier this year, UnitedHealthcare announced a partnership with Qualcomm, one of the nation's largest chipmakers, to offer a wellness benefit program that provides employees with a free fitness tracking device to track activity levels. Employees can earn almost $1,500 a year for meeting certain fitness goals.

While this new program is an innovative way to promote a healthy workforce, there is greater potential for the application of wearable technology in the life and health insurance industry.

Insurance is all about analyzing data to measure risk; the larger the data pool, the more accurate risk analysis can be. The auto insurance industry already employs "telematic devices" that, once installed in a vehicle, will record an insured's driving habits. These devices measure miles driven, speed, and braking force, then wirelessly upload the data to the insurer. Based on this data, insurers are able to tailor policies and premiums to drivers based on their habits; someone deemed a safe driver will pay a lower premium.

If the life and health insurance industry had access to relevant data to analyze, they could offer a similar service. Through analysis of a large pool of data collected from these wearable devices, actuarial analysts would be able to create more precise determinations of how certain lifestyles affect health care costs. Office workers, for example, who spend a majority of the day sitting at a desk may be found to have lower occurrences of increased heart rate associated with exercise and therefore have higher rates of heart disease. Workers with office jobs could be charged increased premiums, with deductions for increasing their activity level through a gym membership.

There are challenges facing the industry regarding access to this type of data. First and foremost are privacy concerns. In accordance with HIPAA, written authorization would be required to release data recorded by these devices. Even with written permission, the industry would have to create a data collection system that is truly anonymous while still providing detailed information about customers’ lives, including work and activity habits, as well as medical history.

By offering free fitness trackers and monetary incentives, UnitedHealthcare has begun the process of associating wearables and insurance in the minds of customers. This is a great first step. The next step may be to offer these incentives in exchange for access to collected data.

Eventually, it may be possible to have a fully automated system of data collection and data analysis that could remove human interaction altogether. This could reduce the risk of data breach, alleviating some privacy concern, as well as the risk of human error and delay in interpreting data.


So, what is the impact of wearables on the life and health insurance industry? Ultimately, wearable technologies are still too new to know if they are just a fad, destined to fade away like so many other promising technologies, or if they will revolutionize the insurance industry; only time will tell.