While the popularity of wearables in the form of fitness trackers is on the decline, the popularity of wearables in the form of smart watches that have embedded fitness trackers is booming. Whether the demand comes from health-conscious consumers looking to monitor the number of steps they take, stairs they climb, and calories they burn, or gadget-hungry consumers that want the convenience of a smart watch and get the bonus of a fitness tracker isn’t entirely clear. Whatever the reason, as wearables become more affordable and prevalent, 23% annual growth is expected, leading to a $100 billion market by 2023, and reaching more than $150 billion by 2026, according to an IDTechEx report.
Wearables are being embraced not only by consumers, but across industries – including life and health insurance – because they provide unmatched opportunities to gather relevant, real-time data and improve business decisions. It is not surprising that life and health insurers are leveraging wearable and other sensor-based devices as tools to better engage with customers and more accurately underwrite risks based on real-time customer data.
As reported in the Top 10 Technology Trends in Life Insurance: 2018 report, wearables can be a boon to the life insurance industry, which traditionally has had limited opportunities for customer engagement. Life insurers often only interact with customers in the form of a bill or statement, and even then, as rarely as once a year.
However, by getting customers to opt-in to wearable programs in exchange for rewards or discounts, life insurers can gather real-time data from their customers’ wearables and other sensor devices and apply data analytics to generate granular insights that can help them design and customize products based on an individual customer’s risk exposure. As an added incentive for both customer and insurer, with the help of wearable devices life can provide notifications to control risk in the event of a building or sudden adverse health condition. As a further form of engagement, insurers can leverage communities of interest and gamification (e.g., creating leaderboards by city or zip code for weight loss, walking goals, workout routines for new dads or moms, etc.) while improving members’ health and gathering valuable data about life events that offer excellent cross sell opportunities.
The large volumes of customer data collected by wearables and other sensor-based devices can also generate informative insights to drive better business decisions. Continuous customer monitoring helps to identify the lifestyle and life-stage needs of already-existing customers while attracting new customers with more targeted products.
Wearables also help insurers gather insights across the value chain, which enables product customization (front office), more accurate risk assessment and pricing (underwriting), and timely customer notifications that can improve life expectancy.
Growth factors for wearables and other sensor devices
Source: Capgemini Financial Services Analysis, 2017
Some firms currently offer policies that reward policyholders who record and share their physical activity using wearable devices, and more insurers might offer similar products in the next couple of years as competition intensifies, customer preferences evolve, and regulations change. In addition, more devices are offering more health data, such as the ability to take blood pressure readings – without any accessories needed after the initial setup – on Samsung’s popular Galaxy S9 phones.
The Insurance Regulatory and Development Authority of India (IRDAI) is examining wearable and portable devices innovations. In a 2017 announcement, the regulator said that both health and life insurers could leverage wearable devices to measure personal fitness and support a healthy lifestyle for customers. IRDAI previously recognized the role of wellness in risk assessment and product design in its health insurance regulations and gave the Ok to general and health insurers to devise mechanisms or incentives that reward policyholders for preventive and wellness habits.
Boston-based John Hancock Life Insurance introduced its Vitality program in 2015 to connect long-term health to policy discounts. The program offers savings and rewards to policyholders who complete health-related activities such as exercising, getting an annual health screening, or receiving a flu shot. Insureds are encouraged to track their physical activity with smartphone apps and devices including the Apple Watch and Fitbit.
State Farm partnered with Silicon Valley-based Lively to leverage the startup’s connected home, health, and medical alert device for older adults. Through State Farm’s Connected Care program, customers are eligible to receive the system which tracks their activity through wearable sensors or connected sensors placed throughout their home. The system enables users to reach either local police or a call center in an urgent situation while medication sensors help participants manage their prescriptions and essential activities.
The industry has been at a disadvantage compared with other financial services firms such as banks because to date life insurers’ presence in customers’ lives had been confined to infrequent transactions such as policy renewals or policy changes.
But now, wearable devices have become a potential customer engagement game changer for both insurers and policyholders by offering the potential to both lower insurance premiums and the risk profiles (by fundamentally shifting mortality tables) of insurance companies. The upcoming World Insurance Report 2018 explores the role of wearables in enabling insurers to capture real-time data and enhancing digital agility and reveals where wearables and smartwatches stand on insurer investment priorities today.
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 SmartInsights, “Wearable Technology Statistics and Trends 2018,” Jessica Wade, November 15, 2017, https://www.smartinsights.com/digital-marketing-strategy/wearables-statistics-2017/
 LiveMint, “Wearables data may influence your health, life insurance premiums,” Shaikh Zoaib Saleem, December 18, 2017, https://www.livemint.com/Money/GFfQPU9H24nME447kF7dNL/Wearables-data-may-influence-your-health-life-insurance-pre.html
 John Hancock website, “Introducing John Hancock Vitality,” https://jhrewardslife.johnhancockinsurance.com, accessed May 2018.
 Coverager, “State Farm boosts its Connected Care program,” Avi Ben-Hutta, August 19, 2015 https://coverager.com/state-farm-boosts-its-connected-care-program/