Soon, fitness trackers to lower your health insurance premiums

As a fitness freak if you are unhappy with you and your obese friends paying the same medical insurance premium despite opposite lifestyles, there is some good news.

A working group set up by Insurance Regulatory Development Authority of India to examine innovations in insurance involving wearable and portable devices has come out with recommendations which pave the way for the companies to provide incentives such as discounted premium based on customer's health and activity data.

This can lead to health insurance premium paid by policyholders during renewals to be lower by about 10-15%. Similarly, installing smart data collection devices in vehicles could make it possible for insurers in India to collect data on the driving habits of customers and adjust the premium accordingly. Also, the use of devices in the future can lead to home insurance being availed by the customer for burglary only when they are away, and not for the whole year.

Today, once a customer is on-boarded by an insurer, the insurer has no effective way of tracking and promoting healthy living or good habits. Tracking data from wearables and devices can change this scenario.

Insurers believe that technology will help them assess risks better. Data analytics and predictive models are seen as a boon by insurers to understand the risks they take on as part of their core business. Wearables can play a crucial role in underwriting in both life and health insurance. In motor insurance, insurers can track driving habits via telematics and Internet of Things (IoT) devices. IoT and Artificial Intelligence can also help tremendously in fraud detection.

A 10-member committee including IRDAI officials and industry executives from LIC, New India Assurance, Bajaj Allianz General Insurance, Max Bupa and ICICI Prudential Life Insurance were part of the working group.

"Insurers could be allowed to provide incentives to a customer based on their health and activity data captured by the device such as discounts on premium or an additional benefit clearly defined, provided the specifics of such incentives are filed with the regulator as part of the product filing procedure," said the report disclosed on Tuesday.

With the increasing awareness of wearables and their uptake by consumers, they could be used to track a policyholder's overall fitness including blood sugar level, blood pressure, and heart rate. Anurag Rastogi, member of executive management, HDFC Ergo General Insurance said, "This eventually could result in lowering the premium on health insurance paid by policyholders during renewals by about 10-15%. Over time as we build more credible underwriting and loss data, the pricing could become more precise."

The panel said the product pricing and premium review could be based on the inputs received from the data captured through the devices. Such products should first be tested in the sandbox environment and as pilot products as may be permitted. "It would be of utmost importance to ensure that the interests of policyholders are not jeopardised in any manner as a result of the transition from the sandbox environment," the committee said in its report.

A provision could also be made to enable insurance companies to add the wearable data pricing option in the existing products, should they find it viable. However, such usage has to be with the consent of the insured and should not result in higher premiums or terms and conditions than is allowed currently. But, if customers show improvement, lowering of premium may be considered, the report said.

Batting for data privacy, the panel said the consent of the customer to share his/her data is a must for participation in such products. The consent should be for specific data and the specific purpose for which it is being obtained. In all instances, the security and confidentiality of customer data shall be protected at all costs, it said.

Besides giving recommendations regarding regulatory approach towards InsurTech in India and data related aspects, the committee gave out recommendations on evolving a regulatory framework for InsurTech and challenges in supervision.

From simple pedometers used to track steps, we now have medical grade technology based wearables, which can track advanced health and biometric parameters like oxygen intake (VO2), heart rate and rhythm, blood pressure, and sleep quality, amongst others. Fitness trackers like Apple watch, Fitbit, Garmin, and many others like them, can now track many advanced health parameters in real time. A majority of the smartphones have the capability to capture some of these parameters themselves and also are interconnected with the wearable devices through various apps.

In the life insurance context, health information forms a critical part of risk assessment. Such metrics can greatly aid in the assessment of life insurance risk, going beyond the traditional methods of risk assessment. Insurers could develop framework/ models using wearable data throughout the life cycle of the insured to not only build attractive product propositions but also to monitor experience throughout the policy term. These frameworks/ models can be used to better the health and fitness of a person, particularly if she/he is leading a sub-standard life.

UNDER WATCH

• This can lead to health insurance premium paid by policyholders during renewals to be lower by about 10-15%
   
• Smart devices in vehicles could make it possible for insurers to collect data on the driving habits of customers and adjust the premium accordingly
   
• The use of devices can lead to home insurance for burglary being availed only when the customer is away, and not for the whole year