Wearable Tech and Insurance: Current and Coming Trends
Wearable tech allows insurance companies to offer highly personalized insurance rates.
When most people think of wearable tech, the first thing that comes to mind are fitness trackers. These are devices that are worn (usually on the wrist) to keep track of step counts, sleep patterns, heart rate, blood pressure, glucose levels, and other biometric measurements.
But there's so much more to wearable tech. Fitness trackers made it mainstream, but it also includes smart watches, headsets used for playing games, and smart glasses that give the users an augmented reality experience.
These devices can collect an incredible amount of data on their users' activity and behavior. So, unsurprisingly, insurance companies have started using them to better understand their policyholders and to issue better policies.
In this article, we'll look at a how insurers are using wearable tech and try to peek into the future to see how the current trends and developments in wearable technology might change the insurance industry.
Healthy Lifestyles = Lower Premiums?
The most common insurance application for wearable tech has been using data about the insured's health to adjust their health insurance premiums.
Wearable tech is well developed and continues to grow more sophisticated. Among other things, these devices can or soon will be able to:
- Collect data to protect the progression of existing health problems
- Enable earlier intervention and management of health problems
- Track physical activity and identify changes in the wearer's lifestyle
- Provide a nuanced, 24-hour view of the wearer's behavior and health (even in their sleep)
Discounts for healthy behavior isn't new. Insurers have long offered lower health insurance premiums to non-smokers. But wearable tech takes this much further.
Premiums have traditionally been priced according to general groupings like communities, age groups, and occupations. With little insight into their policyholders' lives, insurers had to price their policies according to statistical averages. So, women in their 40's who didn't smoke and had no existing medical conditions could all expect to pay roughly the same amount for their health insurance, even if there was a lot of variability in their health.
Fitness trackers, smart watches, and similar devices lift the veil off the policyholder's health levels. Insurance companies no longer have to base their premiums on statistical averages, but can instead analyze your individual data when pricing your health insurance policy.
If your stress levels are relatively stable, your blood pressure is in normal range, your sleep patterns are adequate, and you exercise regularly, your fitness tracker can relay all of this information to your insurer and you could get a lower premium than you would otherwise. (There are other ways to save without wearables – find out how in How to Lower Your Health Insurance Rates.)
Biometrics for Auto Insurance
Wearable devices that track the wearer's physiological state could also have an effect on auto insurance.
Telematic devices installed in vehicles to collect driving data is already being used to provide personalized pricing for auto insurance policies (see An Intro to Usage-Based Auto Insurance and Telematics to learn more). By syncing these up with the driver's wearable tech, the insurer can get an even better picture of exactly how much of a risk the driver is.
The actual conduct of the vehicle is one indicator, but it might not show, for example, whether the driver would have a slowed reaction time when encoutnering an obstacle or would be prone to take foolish risks if some other driver irks them. Wearable devices, however, can give an indication of this by supplementing the driving data with information about the driver's stress levels, heart rate, fatigue, and even their blood alcohol level.
You can already get a better rate on your auto insurance if you drive without incident. But once auto insurers start drawing on biometric data to price their policies, you might be able to secure an even better price if you're zen and sober behind the wheel.
Smart Glasses and Insurance Claims
Smart glasses have the potential to make the claims process easier and more objective (find out How to File a Claim that Gets Paid Sooner).
Smart glasses equipped with a camera could provide invaluable information after a covered event. If the insured is in a car accident, for example, the insurance company could review video footage or photographs captured by the insured's smart glasses to assess exactly what led up to the crash. This could give them greater insight into which party is at fault and to what degree.
Policyholders could also use their smart glasses' heads up display to make sure they proceed properly after an accident. The glasses could display instructions and advice about what to do following an accident (calling the police, documenting the damage, exchanging information with the other driver, and so on). The glasses could also be used to take photos or video of the damage and send them immediately to the insurance company (learn The First Steps You need to Take After Wrecking Your Car).
The discounts are appealing, but not everyone is comfortable with giving their insurer 24/7 access to a stream of personal data.
And even if you are more than happy to hand that information to your insurance company, what if the insurer is hacked and the data falls into the wrong hands?
Opting out is an option, but it could mean more than losing out on discounts. Those who wear fitness devices – and certainly those who wear them in order to get a discount on their premiums – may be more likely to be physically active and lead healthier lifestyles. If insurance industry research discover that this is the case, insurers could conclude that someone opting out of wearing a fitness tracker is likely to be a greater health risk and be penalized accordingly.
It's one thing to get a higher health insurance premium because you're a higher health risk. It's another altogether to get them just because you wish to protect your personal data.
If you do choose the wear the devices, there are some worries, too.
If they are hacked, could you be saddled with terrible premiums because of faulty information transmitted through your devices?
And what if a glitch in the technology means that your passenger's biometric data gets recorded instead of yours while you're driving?
Early adopters of these tech-driven insurance policies will have to be especially diligent to ensure that technical issues don't end up costing them.
With the introduction of the Fitbit fitness tracker and then the Apple Watch, wearable technology became commonplace. But it's not yet had a huge effect on insurance.
Still, the technology is growing increasingly sophisticated and affordable, and the insurance industry is preparing for its widespread adoption. You can expect to see some big changes in your policy options in the very near future.