Wearables to lower insurance premiums by 15%

Wearables can bridge a massive knowledge gap. They are not only used to track fitness but also help to diagnose and analyse medical conditions

Healthy customers are essentially low-risk customers and with wearables, there is evidence to prove the consistency and overall healthy behaviour exhibited by the customer

The ecosystem of IoT (Internet of Things) such as wearables will have multiple touch points at various stages of customer value chain

Over time, as companies build more credible underwriting and loss data, the pricing could become more precise

Wearing a slick activity-tracker band on your wrist doesn’t just make you look cool. In fact, it can also lower your life and health insurance cost by 10-15% the next time you pay the premium.

Traditional insurance models have either tried to predict or use historical data to assess a customer’s risk, but with wearable technology, evidence-based policy pricing is ending the one-size-fits-all approach and personalising products, industry experts tell DNA Money.

The body is the device: The origins of wearable technology can be traced back to the old-fashioned hearing aids, or the calculator watch. The modern revolution started around 2009 with Fitbit. By 2013, Samsung Galaxy Gear was on stands and Apple Watch appeared in 2015.

According to IDC Asia, India's wearable market was up 42% year on year in the second quarter of 2016 with over 567,000 units of wearables sold. While the purpose of wearables ostensibly was not to collect and share health-monitoring data with insurers, the devices can bridge a massive knowledge gap.

Earlier, once a healthy customer was acquired by an insurer, there was no way to know whether his/her health was improving or deteriorating without putting them through diagnostic tests or handling actual claims. With wearables, that puzzle is solved.

In the first week of December 2017, Insurance regulator Irda formed a working group to examine innovations in insurance involving wearable devices, making it clear that wearables are not just a fancy gizmo anymore.

“While adapting to the technology India has a clear edge as we have one of the largest millennial population that is expected to cross 45 crore by 2020. What clicks for us is the observation that the millennials are more comfortable sharing information about them in the virtual world and are likely to be healthier in their young age,” says Manik Nangia, director - marketing and chief digital officer, Max Life Insurance.

Under existing methods, continuous flow of data is absent. There is a dependency on customer’s behaviour and willingness to share data that limits the effort by insurers to design customised products. “Wearables are not only used to track fitness, but also help to diagnose and analyse medical conditions. Also, most consumers have an apprehension when it comes to visiting diagnostic centres and pathologists to check and keep a track of their health and fitness. When it comes to health insurance, wearables present a huge opportunity,” points out Anurag Rastogi, member of executive management, HDFC Ergo General Insurance.

Marrying tech with insurance: Companies are using wearables to understand the risk profile of the customer and other physical parameters. Healthy customers are essentially low-risk customers and with wearables, there is evidence to prove the consistency and overall healthy behaviour exhibited by the customer. For example, Cigna TTK’s Get ProActiv app is integrated with the insurer's rewards program, allowing customers to earn incentives by tracking their activities.

“Our customers can track their activity through our latest Get application by integrating select wearable devices. They can also directly enter non-trackable activities into the application. Points are then earned on the basis of the quantum of physical activity. These points translate into lower health insurance premiums or increased benefits up to 10% of the premium amount,” says Cigna TTK Health Insurance MD and CEO Sandeep Patel.

The ecosystem of IoT (Internet of Things) such as wearables will have multiple touch points at various stages of customer value chain. “The most significant change that we expect is a switch to evidence-based pricing which is currently more in a prediction-based stage. The constant inflow of data can let the insurer decide the premium of next premium cycle,” says Nangia of Max Life.

With the increasing awareness on 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. “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,” remarked Rastogi of HDFC Ergo. His company is considering the launch of insurance products utilising data from wearables.

HEALTH AND MONEY

• Wearables can bridge a massive knowledge gap. They are not only used to track fitness but also help to diagnose and analyse medical conditions
   
• Healthy customers are essentially low-risk customers and with wearables, there is evidence to prove the consistency and overall healthy behaviour exhibited by the customer
   
• The ecosystem of IoT (Internet of Things) such as wearables will have multiple touch points at various stages of customer value chain