If you can't measure it, you can't manage it.
It’s a familiar saying, yet when it comes to wearables, many insurers have encountered challenges in putting this principle into practice. Insurance-linked wellness reward programs can too often fail to pay for themselves, and data from wearable devices is not yet widely or confidently used in underwriting risk assessment.
RGA’s data scientists, underwriters, and actuaries are addressing this problem by exploring the relationships between wearable data and healthcare expenses. The goal? Help health insurers develop customer-centric propositions that incentivize healthy lifestyles and enhance an overall health ecosystem or interconnected network of services. This not only improves underwriting, but may also attract younger, underinsured and uninsured prospects with more personalized and health-oriented offers.
Problems and Possibilities
Health underwriters continue to employ traditional risk assessment methods for good reason. Clinical data from medical examination or blood testing offers much more reliable evidence than applicant disclosures alone. So, while lifestyle factors such as physical activity and sleep are known to have a significant impact on health, these measures have not been widely used, at least in part, due to the subjectivity of applicant disclosures.
Data from wearables may be more reliable than self-reported disclosures and opens new possibilities to insurers. As the use of wearable devices becomes more mainstream, it is now much easier to obtain objective information on lifestyle factors from smart watches, fitness trackers, and body-mounted sensors. This data, when proven to be reliable, can be utilized, not only to enhance risk assessment but also to build wellness reward programs to incentivize healthy activity.
Recent efforts to implement wellness programs and wearables-based models illustrate the opportunities ahead. At a time of rising healthcare expenses, increasingly sedentary lifestyles and aging populations, insurance-linked wellness initiatives seek to empower policyholders to embrace healthier habits, while also enhancing risk assessment by offering a rich store of real-time health data.
Participants in wellness programs often qualify for premium waivers, discounts and other advantages by achieving health goals, and measure progress using both biometric and lifestyle data supplied by wearable devices. These devices offer measures of physical activity and provide sleep scores and resting heart rate. This wearable data could also be used to enhance underwriting risk assessment or deliver insights to improve customer engagement. Still, to put this strategy into action, the industry must first unravel the relationship between wearable data and healthcare expenses. While much focus is given to the risk assessment, the practical challenges of establishing the best data transfer and analytical tools should not be overlooked.
Interpreting Wearable Data
A connection between physical activity and mortality has been firmly established in the medical literature, and RGA recently investigated the implications of wearable data captured by devices in the research study Wearable Technology in Life Insurance. The analysis is drawn from available medical research and mortality evidence from widely recognized databases such as the U.S. National Health and Nutrition Examination Survey (NHANES). The results suggest a strong association between physical activity and mortality improvements, which could support life insurance premium discounts.
Despite this, linkages between specific wearable measurements and healthcare expenses are far less understood. This is a critical gap research can fill: RGA has set out to quantify the relationship between healthcare expenses and data from any smartwatch or fitness tracker by developing hazard ratios for common forms of wearable data. Early results suggest a strong association between physical activity and healthcare utilization, more information will be made available later in the year when the research is complete.
Despite this, linkages between specific wearable measurements and healthcare expenses are far less understood. This is a critical gap research can fill: RGA has set out to quantify the relationship between healthcare expenses and data.
Balancing the Four R’s
When evaluating any novel data source, balancing the value of insight against the need to safeguard privacy is essential. Insurers would do well to consider four key factors when using data – what RGA calls the four R’s: regulations, reasonable expectations, risks (including data reliability), and rewards.
Why regulations? Globally, insurers must meet a variety of data protection and anti-discrimination standards set by authorities, as well as follow local and regional regulatory guidance. Beyond regulatory concerns, however, carriers also must meet customer expectations for fairness, trustworthiness, and transparency in how their personal data will be collected, protected, used, or, just as importantly, not used.
Insurers should be aware of the risks linked to reliance on new data sources, including the possibility that this data may prove to be unreliable. Safety recalls and privacy complaints also could negatively influence public perceptions.
And all these challenges should be balanced against the significant opportunities these devices represent. The rewards could be great: data from wearable devices could help insurers better understand and adapt to changing customer needs and therefore increase placement ratios, improve customer engagement, and, perhaps more importantly, encourage active healthy living and improved claims experience.
By understanding the true value of wearable data, insurers may be able to more accurately underwrite, develop more attractive and affordable wellness initiatives that reduce the incidence and severity of chronic diseases, and improve the overall customer experience. Wellness and wearables could be at the foundation of an entire health ecosystem of services that could expand the reach of health insurance into underserved markets.
RGA continues to explore this intriguing field. Look out for more insights on the relationship between wearable data and healthcare expenses and how we can utilize these insights to develop innovative health underwriting and wellness propositions.