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Wearable Technology in Life Insurance: Knowledge Is Power

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Wearable technology has the potential to transform the life insurance industry by empowering insurers and insureds alike with valuable health knowledge.


By gaining a better understanding of consumers’ health and lifestyle habits, insurers are able to develop products and set mortality estimates that better reflect the health of policyholders, while consumers have the information they need to take control of their physical and financial well-being.  

For life insurers, wearable devices can also increase the number of touchpoints with their policyholders. Insurers typically receive health data on a policyholder up to two times: at policy application and when a claim is filed. Similarly, life insurance policyholders often only think of their insurer when the premium comes due. Because wearables offer a steady stream of actionable data points that can be leveraged by insurers and their customers, they create opportunities for more interactions during the policy life cycle.

The knowledge gleaned from wearable data can also be applied to other insurance functions besides customer engagement. By analyzing lifestyle data along with currently used underwriting data, underwriters can better understand health conditions and lifestyle habits that may affect mortality. Wearable data may provide a more granular assessment of these mortality risks, potentially allowing insurers to rate applicants more accurately and offer more customized plans based on their daily behaviors. Furthermore, useful feedback from the insurer, such as reward programs that support or otherwise incentivize lifestyle changes, can engender trust from the policyholder.

Incorporating information from wearable technology into the insurance space presents a multitude of challenges, including data privacy and security concerns, but if more consumers and insurers continue to embrace advances in wearables, the future of this technology looks not just promising, but empowering.

Insurers: Understanding consumer health and product needs

Wearables allow insurers to collect a wide variety of data about individuals: heart rate, activity levels, sleep duration and quality, skin temperature, and blood oxygen levels. Insurers can use this wealth of detailed data to more accurately assess an individual’s mortality risk based on these characteristics, and to create more customized products that better meet consumer needs and encourage more consistent communication between insurers and insureds.

Life insurers can use wearables to expand their product offerings. An example of this is peer-to-peer (P2P) insurance programs, which are a growing phenomenon. In P2P insurance programs, individuals with similar interests or lifestyles form a group, pool their funds, and administer the insurance together.1 Unlike traditional insurance, the excess in premiums is refunded to the members of the program; members can either keep the refund or donate it to a charity of their choice, which extends the benefits of life insurance beyond the policyholders to other members of society. P2P groups often consist of family and friend groups, but insurers could use wearable data to group individuals based on similar lifestyle habits. For example, insurers could form an insurance pool of marathon runners with similar cardiovascular health and weekly mileages. Because the people within a P2P group may know one another and have a personal financial stake in the program, P2P groups encourage accountability, increase transparency, and reduce the likelihood of fraudulent claims, which are recurring issues in traditional insurance structures. However, as P2P programs gain traction, insurers will need to work with regulators and comply with all applicable government regulations. As this model gains popularity among consumers, P2P insurance has the potential to transform the industry.

The ability to see the day-to-day snapshots of an individual’s health can also assist with dynamic underwriting. Coupling traditional underwriting practices with an applicant’s real-time wearable data may allow underwriters to more accurately evaluate a policyholder’s mortality risk and determine an appropriate premium. Insurers can also use this data as the foundation for an activity bonus that awards insureds who adopt healthier lifestyles with premium discounts and other benefits. Not only do these programs lead to better risk management, they also provide incentive for policyholders to remain active and healthy throughout the terms of their policies – a win-win for both insurers and insureds.

Wearable technology gives life insurers an enhanced ability to reach consumers and build stronger relationships with customers. The integration of wearable data into an insurance application can potentially expedite the lengthy underwriting process that often deters potential policyholders from applying for life insurance. If an insurer emphasizes a speedier application process when marketing its products, consumers might be more likely to apply for a life insurance policy. Once the applicant purchases a policy, incentivizing wearable usage through bonus programs encourages regular communication between the policyholder and the insurer, thereby potentially reducing policy lapse.

Consumers: Taking control of their personal health and finances

While insurers embrace wearable technology to better assess risks and create more relevant product offerings for policyholders, consumers also reap health and financial benefits when they incorporate wearable technology into their everyday lives. 

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A real-time health assessment and awareness of its financial implications empower consumers to transform their personal health and seek assistance with establishing and maintaining a healthier lifestyle.

Wearable devices provide consumers with more detailed information about their overall health by tracking a wide variety of physiological metrics at any given moment, day or night. While the most common wearables track calories burned, heart rate, and hours spent sleeping, some of the latest wearable technology has the ability to do much more, such as monitor hydration and bone density. Wearable devices can detect subtle increases in heart rate and skin temperature and decreases in blood oxygen level that may signal the onset of illness, which enables earlier detection of symptoms. These devices alert the user to seek medical assistance before the illness worsens, health deteriorates, and medical costs increase. If consumers act on these early health indicators from their wearables, they could save on healthcare costs as well as improve their health.

Wearables can also detect signs of more serious diseases and conditions that could greatly impact their health, risk classification, and insurance premiums. Changes in heart rate can signal heart attacks, atrial fibrillations, and stroke; changes in glucose levels, skin temperature, and perspiration levels can indicate symptoms of type 2 diabetes; and even sleep quality data can reveal symptoms of sleep apnea. Consumers benefit from these revelations – early detection means that they can seek treatment and make the appropriate lifestyle changes to either control or reverse their conditions. For instance, if a user notices symptoms that correlate to type 2 diabetes risk, he or she can adopt healthier habits and reduce that risk, positively impacting their health and finances before medical bills skyrocket.

Overall, incorporating the data from wearable devices in different areas of the life insurance value chain is advantageous to consumers and insurers alike. Wearables allow individuals to monitor their own health and adopt healthier habits if necessary. Along with this knowledge comes the potential for premium savings that result from making lifestyle changes that may improve their health.

The Future of Wearables: Overcoming obstacles to achieve success

Despite the knowledge wearables can provide, insurance product offerings that capitalize on that data may be limited without more widespread adoption of wearable devices. While consumer demand for wearable technology has increased in recent years, according to BI Intelligence research, only about one-third of U.S. consumers own a fitness tracker or smart watch, and even fewer use them on a regular basis.2 In order to effectively incorporate wearables in the life insurance industry, insurers must find a way to increase consumers’ use of wearable technology.

One of the biggest concerns consumers have regarding the use of wearables in the context of insurance is privacy.Many consumers who have fallen victim to data breaches and targeted marketing campaigns are hesitant to trust life insurers with their daily health data. Insurers must combat these concerns by emphasizing the benefits of using wearables and sharing such data, while also reassuring consumers that their privacy will be maintained. Fortunately for insurers, a recent LIMRA survey shows that younger generations are more willing to share their activity tracker information; therefore, despite the concerns regarding data security, the future of wearables in insurance is promising.³

Even if insurers can entice consumers to use wearables for insurance purposes, it may be difficult to maintain engagement for a long period of time. This issue stems from a lack of incentive to stick with it when the individual feels that using a wearable is too much of a hassle. Insurers can keep insureds motivated by regularly providing their policyholders with incentives throughout the policy period. Insurers can also increase engagement by providing wellness and disease management programs for high-risk individuals who may be hesitant to share data that shows their poor health. Lifestyle changes can be overwhelming, and if consumers receive support from their insurer throughout the process, they are not only more likely to successfully create long-lasting habits, they can also develop a stronger relationship with their insurer.

It is equally important for insurers to respond to consumer demand as wearable technology advances. For example, many consumers now prefer smart watches over regular fitness trackers, especially now that more smart watches are able to function without being connected to a smartphone.² Smart coaching devices, which use real-time fitness data to help users create virtual personal training plans, are also gaining popularity among wearable enthusiasts.4 To ensure effective integration of wearables in the industry, insurers need to analyze wearable market trends and innovations to understand which incentives and devices best fit their consumers’ lifestyles and promote program engagement and participation.

Challenges abound, but integrating wearable technology into the life insurance environment shows significant promise, offering advantages both to companies and consumers. Wearable data can provide the knowledge insurers need to create more customized life insurance products, set more accurate mortality assumptions, and consistently engage consumers, while insureds are encouraged to take control of their physical and financial well-being.



1 “Peer to Peer (P2P) Insurance”, National Association of Insurance Commissioners, March 1, 2018, accessed March 2018 at http://www.naic.org/cipr_topics/topic_p2p_insurance.htm

2 “Consumer interest in wearables is picking up”, Jessica Smith, Business Insider, December 12, 2017, accessed March 2018 at http://www.businessinsider.com/consumer-interest-in-wearables-is-picking-up-2017-12

3 “Wearable Technology in Life & Wellness Programs”, Sungyeon Kim, LIMRA, February 23, 2018, accessed February 2018 at http://www.limra.com/Research/Abstracts/PDF/2018/180221-01.pdf?research_id=10737455366

“Rapid Growth: The Past, Present, and Future of Wearable Technology”, Grace College, accessed March 2018 at https://online.grace.edu/news/business/the-past-present-future-of-wearable-technology/

The Authors

  • Kristen Kenney
    Actuarial Assistant
    Global Research and Data Analytics
    RGA
  • Kaitlyn Fleigle

    Intern
    Global Research and Data Analytics
    RGA

  • antiselection
  • anti-selection
  • dynamic underwriting
  • innovation
  • Kaitlyn Fleigle
  • Kristen Kenney
  • medical innovation
  • P2P
  • peer to peer
  • Quantified Self
  • wearable medical device
  • wearable technology
  • wearables
  • wearble