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 struggled to put this sound advice into practice. Insurance-linked wellness reward programs can too often fail to pay for themselves, and data from wearable devices has yet to be incorporated into underwriting risk assessment.
RGA’s data scientists, underwriters, and actuaries are addressing this problem by unravelling the relationship between wearable data and health care expenses. The goal? Help health insurers develop customer-centric propositions that not only incentivize healthy lifestyles, but also enhance underwriting.
Problems and Promises
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 solves this problem – and introduces another. 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 can be utilized, not only to enhance risk assessment, but also to develop wellness reward programs.
Recent efforts to implement wellness programs and wearables-based models illustrate the opportunities, and risks, 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 assessments by offering a rich supply of real-time health data. Participants in wellness programs often qualify for premium waivers, discounts and other advantages by achieving their health goals, and measure their 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.
Interpreting Wearable Data
Designing insurance propositions based on wearable data requires insurers to understand, at a far more fundamental level, how to underwrite using this new information. The relationship 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.1 Despite this, linkages between specific wearable measurements and health care expenses are far less well understood.
This is a critical gap research can fill: RGA has set out to attach an expense to data from any smartwatch or fitness tracker by developing hazard ratios for three common forms of wearable data – physical activity, sleep, and resting heart rate.
Considering the Four R’s
When evaluating any novel data source, insurers would be well served by taking the four R’s into consideration: regulations, reasonable expectations, risks, and rewards.
Regulations represent data protection and anti-discrimination standards insurers must achieve, as well as any local and regional regulatory guidance companies should follow. Beyond regulatory concerns insurers must also meet customer expectations for fairness, trustworthiness, and transparency about how data will be collected, protected, used, or, just as important, not used.
Insurers should be aware of the reputational risks linked to reliance on new data sources, including the possibility that safety recalls, privacy complaints, and accuracy lawsuits against wearable manufacturers could also affect the insurance industry. 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, fast-track sales, improve customer engagement, and, perhaps more importantly, encourage active healthy living and improved mortality experience.
By understanding the true cost of common wearable data, insurers may be able to more accurately underwrite, develop more attractive and affordable wellness initiatives, and expand the reach of health insurance into underserved markets.
RGA continues to explore this intriguing field. Watch for more insights on the correlation between wearable data and health care expenses and how we can utilize these insights to develop innovative health underwriting and wellness propositions.
Contact RGA's global health team to learn more.