As the popularity of wearable technology grows, the life insurance industry is beginning to explore ways of using the data generated by those devices to capture more information on their policyholders.
Although the concept raises some privacy concerns, many industry players view it as an innovative way to engage clients more effectively and develop more personalized products and services.
Boston-based John Hancock Life Insurance Co., a subsidiary of Manulife Financial Corp. of Toronto, announced in April a new life insurance program called Vitality. This program is designed to reward policyholders for making efforts to improve their health.
Clients who sign up will receive a Fitbit – a wearable device produced by San Francisco-based Fitbit Inc. that tracks an individual’s physical activity, eating habits, weight and sleep – to help to gauge clients’ progress toward personalized health goals. Clients who demonstrate that they are improving their health can qualify for lower insurance premiums and other rewards.
“The whole program is designed to encourage people to take small steps to improve their health,” says Michael Doughty, president of John Hancock Insurance. “If we can get our customers to live a longer, healthier life, it’s good for John Hancock; there’s value being created. What we’re trying to do is share that value with our customers.”
Although the program is available in the U.S. only, it’s possible that Canadian life insurers eventually will embrace wearable technology in similar ways. The prospect of more data is attractive to insurance firms, as it improves their actuarial capabilities.
“As [use of] wearable technology increases, we’re definitely going to see more data leveraged from that,” says Charlie Conron, chief technology officer with London, Ont.-based insurance technology firm Life Design Analysis Inc.
Some players in Canada’s property and casualty insurance industry have ventured into this area, he notes, with the use of car-tracking devices that enable auto insurance policyholders to qualify for lower premiums based on their driving behaviour.
John Hancock’s new offering, which was created in partnership with Chicago-based wellness program provider The Vitality Group Inc., is available on John Hancock term life and universal life policies. Doughty says the insurer plans to expand the program eventually to all of its life insurance products.
Policyholders who sign up will complete an initial online health review. Clients then begin accumulating “Vitality points” for health-related activities such as exercising, getting an annual physical or a flu shot. The points are based on the data generated by the Fitbit, as well as by information that policyholders submit manually, such as medical forms.
The number of points that policyholders earn during the course of a year determines their program status level. As policyholders move up in status, they can qualify for a discount on their insurance premiums of 5%-15%, as well as for various travel, shopping and entertainment-related rewards and discounts.
The idea is to engage clients throughout the life of their policies, Doughty says: “The whole [life insurance] industry has been looking for ways to make the product relevant to today’s consumer. This [Vitality program] makes [for] a very engaging product, a very interactive product – and it’s something for now, as opposed to just something for later.”
The concept is likely to resonate with many consumers, particularly as health is top of mind for many people, says Gil Quesnelle, director of business development with Ticoon Technology Inc. in Toronto. “It makes people healthier, as well as saving them money,” he says, “so, why not?”
The initiative is likely to appeal to younger clients – a demographic that the industry has struggled to connect with in recent years, says Conron: “This is a way of reaching them on their level to get them engaged and interested in insurance.”
However, not all consumers will be comfortable with the idea of transmitting details of their day-to-day routines, exercise and eating habits to their insurers.
“You put this wristband on, you wear it around, and someone is trapping that data,” says Quesnelle, who anticipates that some clients will have privacy concerns with this concept.
However, Doughty says, John Hancock’s research found that a high proportion of consumers are willing to share information when they’re able to reap benefits from it. “If they know that information is being used to benefit them and to make the program better for them,” says Doughty, “then they see value in it.”
Clients also like the idea of having products and services tailored to them, even if it means having to give up personal information, says Chris Karram, financial advisor and co-CEO of Safebridge Financial Group in Toronto: “Everyone loves the idea of being treated as an individual. The more data points the insurance companies have, the more they can tailor and customize products for the individual.”
Although such technological innovation represents a progressive step for the industry, Quesnelle says, advisors should be wary of the way their role could be affected by technologies that enable insurers to engage clients and collect information directly.
“Advisors have to increase their value proposition,” he says. “You have to get in front of your clients more often, because there are other ways people are getting at your clients.”
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