The Growing Impact of Wearable Technology
CIPR Newsletter, November 2017
Wearables and Their Implications in Insurance
CIPR Webinar, November 2017
Commit a crime? Your Fitbit, key fob or pacemaker could snitch on you.
Washington Post, October 2017
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Last Updated 1/3/19
Wearable devices, or devices incorporated into items of clothing or accessories worn on the body, are one of the latest trends in consumer technology. These devices are small enough to wear and include sensor technologies which collect and deliver data such as physical activity vital signs and location. Examples of popular wearables include the Fitbit, Apple iWatch, and the baby monitoring device Mimo. Insurers have taken a keen interest in wearables because of the new opportunity to engage with customers, the huge amounts of data they collect and the potential for harnessing this data to better assess risk and tailor business approaches. However, wearables have expanded from fitness trackers to devices collecting a far greater range of health data. It is unclear who exactly owns the data and if companies are sharing the data generated by wearables. While consumers like the potential benefits wearables promise, there are concerns related to the potential for privacy invasion and security breaches.
Wearables and the Insurance Industry
Wearable technology achieved mainstream popularity with the Bluetooth headset in 2002, although some older technologies like hearing aids are considered wearables as well. Between 2006 and 2013, iconic wearable technology devices like Nike+, Fitbit, and Google Glass were released. Wearable technology is now more popular and diverse than ever. More than one in five internet users wear some type of wearable device on their wrist daily. From 2007 to 2017, Fitbit sold more than 60 million devices, yet only holds the third largest share of the global wearables market behind Apple and Xiaomi as of 2018. The rise in wearables reflects an increasing desire to know about and manage our own health. According to a 2016 study, 65% of people think technology has an important role to play in health and wellbeing.
Wearable technology has already entered the life and health insurance space. Health professionals are using wearables like smart or implantable devices for patient monitoring, diagnostics, and drug delivery. When enabled with analytics, wearables can be used by consumers to manage their health and by insurers and employers to improve wellness. John Hancock, one of the oldest U.S. life insurance companies, recently announced that they will stop underwriting traditional life insurance and instead sell only interactive policies that track fitness and health data through wearable devices and smartphones.
Some of the potential uses of wearable technology in the insurance industry include underwriting, risk management, new product development, workers' compensation, and claims management. Life insurers could use wearables to replace or supplement medical exams often used in the underwriting process, reducing costs and improving data quality. Both life and health insurers are exploring the use of fitness tracking wearables to incentivize physical activity and other healthy lifestyle choices. Lastly, some wearables can relay real-time information to assist in claims processing, capturing video, pictures, or audio to document property damage or take statements from witnesses.
As with many emerging technologies, issues of consumer privacy with wearables are chief concerns. These devices collect a huge amount of data, including data considered protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA). However, in many cases it is unclear who the data belongs to (the consumer or the company) as well as how the data can be used, shared, or sold. With cybersecurity attacks on the rise, there is also a possibility this data may be stolen or exposed.
Another concern is the lack of information or testing about the accuracy of data collected by wearables. The accuracy of data generated is a concern since fraud could easily be accomplished if companies do not achieve sufficient protections like fingerprinting or other identification measures. A number of studies have compared various wearables for tracking physical activity and results showed large variations between different devices. Finally, wearables have created interesting legal issues for litigants. Because wearables present new sources of personal and physical data, legal experts have started to recognize wearable devices as the human body's "black box". Data from these devices have already been used in several personal injury claims cases.
The NAIC's Innovation and Technology (EX) Task Force is charged with monitoring emerging technologies like wearables in the insurance sector. The Task Force provides a forum for discussion of innovation and technology developments in the insurance sector to provide resources for and educate state insurance regulators on how these developments impact consumer protection, insurer, and producer oversight. Additionally, the NAIC Center for Insurance Policy and Research (CIPR) conducted a webinar entitled "Wearables and Their Implications in Insurance" in 2017. The webinar provides an overview of wearable devices, explores some of the benefits and challenges, and discusses their insurance implications. A replay of the webinar is available free of charge on the CIPR website.