Wearable Insurance: The impact of smart devices on the insurance industry

As John Hancock puts it, “Life Insurance That Celebrates Life. Imagine That.” The company recently made a splash with its new Vitality rider, which provides rewards and premium savings for life insurance customers who purchase a Protection UL or John Hancock Term Life Insurance policy. Not only does the rider come with potential rewards, but customers who participate also get a Fitbit device to track healthy behaviors, tapping into the growing interest in wearable devices.

Customers who purchase a life insurance policy with the rider fill out a short health review to receive the Fitbit device and then earn points for healthy behaviors such as exercising, annual health screenings, and staying tobacco-free. As they accumulate points, their vitality status will improve which leads to discounts on travel, entertainment, shopping, and fitness at specific partner brands. But most importantly, a higher status means the potential for premium savings over the lifetime of the policy.

The concept of healthy lifestyles rewarding life insurance customers is not new. Underwriting credit programs have long rewarded maintenance of health. Back in 2007, Accordia Life (formerly Aviva USA) introduced its Wellness for Life rider, where policyholders could reduce insurance costs by getting regular physicals and controlling their weight. What Vitality does is place life insurance squarely in the midst of the ever-growing wearable technology trend. This was not entirely unexpected. The insurance industry has been anticipating the acceptance of wearable tech to be imminent. A recent study found that nearly two-thirds of insurance company executives expect wearable technologies to have a significant impact on the industry in the next two years, while nearly one-third said they have already begun using wearables to engage customers, employees, or partners.

Globally, consumers crave the idea of wearable devices. Mintel’s Consumer Trends 2015 data shows that 22% of US consumers have purchased a wearable device and 40% of consumers would buy technology that easily connects to products they already have. In Canada and the UK 37% and 40% of consumers respectively would be interested in using a device that tracks heart rate, blood pressure, and movement.

40% of US consumers would buy technology that easily connects to products they already have

Startup company Oscar Health is another example capitalizing on the trend. When customers connect their Misfit wearable devices to the Oscar app, they are rewarded for achieving step goals up to an annual maximum. Even employers have found ways to engage employees in a similar practice. BP created a program for their employees, giving free Fitbit devices to encourage activity and rewarding them with lower health insurance premiums if their annual step goal was met.

Beyond general interest, wearable devices provide a win-win for both consumers and insurance companies. Individuals can realize savings and receive rewards, while insurance companies will have healthier clients. Possibly more intriguing for some insurers is the increased knowledge about customer activity through the collection of extensive data on customer behavior. Furthermore, these devices could serve as a catalyst for better customer engagement as they provide continued opportunities for positive customer-brand interactions throughout the policyholder’s life. This could be a huge win, particularly for life insurers, an insurance sector that policyholders generally only interact with at time of application, for administrative changes and upon the death claim.

Insurance companies aren’t the only stakeholders paying attention to this trend. Apple has the capability to provide a state-of-the-art, highly sought after wearable; Google has the breadth of data that could help insurance companies understand the path to purchase; and telecommunication giants like Verizon and AT&T have the expansive distribution channels. These concepts aren’t just hypothetical – they are recent developments in the US that stand to directly impact the insurance industry, including the Apple Watch, Google auto quote comparison site and Verizon’s roadside assistance program.

While it may be too early to tell how utilization of this benefit is embraced by consumers beyond initial interest, we do know that brands, both inside and out of the insurance industry, seem eager to jump into the “wearables insurance” game.  Whether it is a solution like John Hancock’s vitality rider or opportunities to partner with tech and telecommunications companies, insurers should be prepared to offer something innovative in the arena of wearable technology or look for ways to partner with brands that have interest in disrupting the insurance industry.

As Director of Insights, Insurance, Stephanie focuses on all insurance sectors for Mintel Comperemedia. She is responsible for providing internal and external stakeholders with insights and analysis on trends in the Life, Health and P&C insurance industries.