How have consumers and insurers been adopting wearable technology up to now?
Tim: In day-to-day life, wearables tend to be used for fitness or fashion – a training aid or a shiny
gadget that looks cool. Their use in the life insurance industry typically mirrors this. Insurers may track a policyholder’s fitness through steps or exercise and reward their activity. They might also use
wearables to entice a sale or provide a mechanism for continued engagement.
While the use of wearables in life and health insurance has been a hot topic for several years, their penetration is still relatively low. They have more niche appeal among customers, with the focus on fitness attracting those who live active lives. This produces a positive selection effect for insurers, but does not have mass-market appeal.
To widen the appeal, the focus needs to shift away from fitness and towards health. Fitness contributes to health, but giving policyholders insight into other areas, along with actions they can take, should make the proposition attractive to a broader section of society.
What are some of the emerging health capabilities of wearables?
Etienne: There have been several interesting new wearable capabilities in the past few years, such as measurement of blood oxygen saturation, breathing rate, and electrical activity in the heart through electrocardiograms (ECGs). Many brands have pursued medical regulatory approval, such as FDA and CE clearances, which is exciting as it opens a whole range of possibilities for the early screening and management of health conditions.
The true value, however, won’t come from ECG measurements of individuals with known heart conditions – there are already plenty of clinical devices for this purpose. Value will be derived when we deploy wearables at scale in the general population. This will allow us to generate new insights into the aetiology of disease and screen the population to proactively prevent and manage causes of declining health, such as heart arrhythmias and sleep apnoea, as well as monitor for acute infections such as COVID-19.
A lengthy and complicated regulatory process needs to be followed to leverage these devices for clinical use. However, there is potential in an early detection and preventative approach. The accessible, affordable and non-invasive nature of wrist-based wearables makes them, at present, the most viable option for the type of continuous monitoring required for this approach.
“There is tremendous potential in an early detection and preventative approach”
What opportunities do the new capabilities of wearables open up for insurers?
Lisa: Wearables deliver ongoing insights into customers’ health, taking measurements as people go about their everyday lives. This contrasts with more static and intermittent health data sources, such as electronic medical records, which provide insights only at the point at which a patient engages with the health service. Insurers can use ongoing health data from wearables to support holistic risk assessment during a customer’s insurance policy lifetime. Insurers can use this to better understand the mortality and morbidity risk structure of their portfolio, and monitor changes in health risks over time.
The growing health detection capabilities of wearables could also allow insurers to use wearables to prevent claims. For example, a customer whose wearable indicates that they have below-average cardiovascular health could be provided with personalised nutrition and exercise advice to help them improve it. For those with more severe cardiovascular risks or a sudden worsening of heart health, onwards referral to clinical support could be signposted. Using wearables to help customers manage their long-term health could help insurers to reduce claim frequency and severity.
In addition, the screening capabilities of wearables for acute and chronic disease detection could be used to support the diagnosis and treatment of ill health. For example, a meta-analysis showed that those suffering from severe sleep apnoea symptoms experience more than twice the mortality risk of the general population; even mild sleep apnoea leads to a 20% increase in mortality. It is highly prevalent in populations such as the US, but many people go undiagnosed. Research suggests around 20% of the population are likely to be affected by the condition, but 90% have not had it confirmed by a diagnosis. There is therefore significant untapped potential in using wearables to detect health conditions such as sleep apnoea. Insurers could use wearables to reduce mortality claims by screening customers for diseases and directing them to clinical care for diagnosis and treatment.
“Integrating wearables into insurance would complement the more traditional financial protection provided to customers”
What are some of the challenges of integrating wearables into insurance?
Tim: We have already mentioned the niche appeal of wearables when the focus is on fitness, which has certainly contributed to their lack of adoption in life and health insurance products. Another issue is cost. High-end devices offering the latest technology often cost a few hundred pounds, and can effectively double an insurer’s acquisition cost if offered alongside an insurance product. Dealing with this either requires convincing the policyholder of the value they are getting (so convincing them to pay a bit more), or offsetting the cost elsewhere, perhaps by accounting for the reduction in claims that is expected as a result of policyholders using the device.
Insurers could allow policyholders to use their own devices, but this creates its own challenges. There is a lack of consistency between different wearable devices; even relatively simple measures such as step count can be out by around 20%. If insurers are to use the data from wearables to change outcomes for customers, these inconsistencies need to be addressed.
A further challenge is maintaining engagement levels. The average policyholder is unlikely to tolerate a process in which they must log into an app every day, or actively take other steps to ensure that their data is collected. Data collection needs to be as seamless and non-intrusive as possible.
What challenges have wearable tech companies started to tackle?
Etienne: An existing response to the challenge of intermittent data quality in the case of signal disruption is to build additional intelligence into the wearable tech solution offered to insurers. A measure of reliability can be provided to the business user for the health information generated.
For example, photoplethysmography, used in wrist-based wearables to measure blood flow, is sensitive to movement and vibration, so this approach is an important part of ensuring data integrity for key health metrics. It’s important for insurers to have solutions in place that identify which data is reliable to use for decision-making and which should be ignored.
The lack of standardisation across different device brands is something that wearables manufactures are not currently addressing; independent providers offering wearable tech solutions to insurers are better positioned to tackle this. For example, LifeQ provides a range of on-device software solutions to device partners to achieve consistency and standardisation across a range of supported brands.
Wearables are providing large volumes of continuous biometric data, so insurers also face a challenge in obtaining high-value health information from this wealth of data. Downstream analytics is important, and needs to be easy to understand and interpret for both the insurer and the end user.
How could wearable tech transform the insurance industry during the next few years?
Lisa: Customers take out insurance to protect against ill-health events. Integrating wearables into insurance in a way that reduces the risk of claim would directly complement the more traditional financial protection provided to insurance customers.
Insurers could use continuous biometric insights from wearables to better understand their customers’ health needs and support them in living healthier, longer lives. This is an area in which the interests of the insurer and the policyholder naturally align. Hopefully we will see wearable technology transforming the insurance industry to drive increased value for insurers and their customers through claims prevention.
Lisa Balboa is business development actuary at Hannover Re
Tim Smith is head of protection at Hannover Re UK Life Branch
Etienne van Wyk is commercial director at LifeQ