Johannesburg, 10 Aug 2023
The rapidly expanding adoption of wearable technology and the internet of things (IOT) marks a turning point for the life and health insurance industry. Consumers today understand the value of their data with the potential for wearables further providing impetus to unlock a richer insurance experience. But what does this transformation look like, and how can insurers navigate potential obstacles while preserving consumer privacy?
This is also reflected in the adoption rate of wearable devices. At the end of last year, more than 1.1 billion people globally used their wearables to get connected, up from 722 million in 2019. While initially driven by the smartwatch market, wearables have expanded to include wristbands, hearables and other fitness devices. According to Munich Re, wearables present an appealing value proposition for people who want their connected devices to deliver a more personalised experience. At a fundamental level, wearables provide a means for life and health insurers to continually engage with their policyholders, moving from infrequent touch-points to daily interactions. In doing so, the potential for stronger relationships between insurers, their partners and policyholders can unlock new business growth opportunities.
The power of wearables
Wearable technologies enable insurers to access dynamic, real-time health data about policyholders. This wealth of data, reaching beyond historic health records, offers insurers an intricate view of a person's lifestyle, facilitating more accurate risk assessment and personalised product offerings. The insights derived from wearables, tracking everything from activity levels to resting heart rate and sleep patterns, present insurers with the means to refine pricing and risk classes, making them more competitive.
Moreover, this continuous stream of data offers insurers the opportunity to dynamically adjust pricing and engage more proactively, based on an individual's ongoing health behaviours. This is a transformative shift from traditional underwriting, which largely relies on static health information obtained at the point of policy issuance. But beyond underwriting, using wearables can positively impact all aspects of the insurance sector.
For example, biometrics can ensure healthcare providers can deliver preventative intervention at lower costs and efficiencies than without a connected sensor being used. Research from behavioural psychology and economics show that wearable technology is an effective tool in changing individual attitudes, behaviour and ownership of health problems to the net benefit of the subject’s health and a cost reduction from an insurer’s perspective.
Addressing the elephant in the room
Integrating wearable technology data into underwriting processes is not without challenges, particularly around privacy and the ethical use of personal data. Insurers must demonstrate a commitment to privacy by ensuring secure data handling, transparent practices and obtaining informed consent from policyholders for data use.
Another challenge lies in the integration, maintenance and support of this new technology. Rather than building costly and complex proprietary solutions, insurers can lean on partners like Alula Technologies, which has developed secure and scalable solutions like the HealthCloud platform, which provides a consolidated feed of data from various wearable device and health tracking platforms. HealthCloud’s embedded algorithms are able to handle vast amounts of data streams, provide real-time analysis and powerful insights in the form of health status and risk scoring.
Furthermore, insurers must navigate data validity concerns. Wearables vary in quality and accuracy, potentially impacting the reliability of the data. To address this, Alula not only rigorously tests all data streams for accuracy and validity, but also advocates for a comprehensive view of risk, supplementing wearable data with traditional health data, such as medical history from doctors, hospitals, pharmacies and pathology labs, together with wellness and claims data.
The power of partnership
As wearable technology becomes more prevalent, collaborations between insurers and tech companies can drive innovation. Partnerships offer an avenue to blend expertise, resulting in products that are tailored to consumers' needs while incorporating the benefits of real-time health data.
Furthermore, a collaborative approach with customers also needs to be considered. Educating customers about the benefits and risks of sharing wearable technology data is essential. It is crucial to communicate the advantages of sharing data, such as more personalised offerings and potentially lower premiums. But trust is the bedrock of this new insurance landscape. Insurers need to be transparent about data usage and the measures in place to ensure its protection.
Taking this further, insurers can leverage wearables to encourage healthy lifestyles among policyholders, offering rewards for healthy behaviours – a concept known as shared-value insurance. This not only helps insurers manage risk but also positions them as a supportive partner in the policyholder's health journey.
The incorporation of IOT and wearable technologies into the life and health insurance space represents a seismic shift from traditional underwriting practices. As we explore this new terrain, it is clear that these technologies offer significant opportunities for insurers to enhance risk assessment, tailor products and engage customers in their health.
At Alula Technologies, we remain committed to leading the industry in leveraging wearable technologies for the benefit of insurers and policyholders alike. As we overcome the associated challenges, we envision a future where life and health insurance are not just transactions, but a dynamic partnership between insurer and policyholder, rooted in health and well-being.
The Alula Technologies group provides business critical solutions to Life and Health insurance and Pensions companies. Our solutions modernise policy administration, digitalise policyholder and channel engagement, and intelligently automate key insurance business processes. We also integrate first and third-party data, including health and wellness data, to drive more efficient operations, improved policyholder experiences, and a better understanding and management of risk.