The Case for Connected Wearables in Life Insurance

Wearables in Insurance CSC Blogs

This article originally appeared in the January 2015 edition of Asia Insurance Review and was recently ranked by readers in the top 5 of articles published so far in 2015.

Abstract: In this article, Andrew discusses the impact on mainstream awareness of health and fitness through the Apple Watch launch and how this trend will positively impact the development of data driven Life and Disability Insurance propositions.

It was an event probably more anticipated and certainly more hyped than Neil Armstrong’s Moon shot in 1969. I had never tuned into one before, yet there I was, sitting in my pajamas at 1am, frantically trying to get back onto the streaming podcast that my iPad had just dropped, as millions of other nerds the world over were trying to do the same thing.

Apple’s 9th of September 2014 product announcement event had drawn unprecedented interest. I certainly was expecting Apple to “do it again” – you know; change the world in a subtle yet pervasive way, as I am sure many others struggling to get onto the live webcast also believed. After all, the company that Steve built had done it with iTunes, with the iPhone and with the iPad. And now we all wanted to see if Apple’s first wearable device – the Apple Watch, was going to change our lives in the same way.

Well we definitely saw something, that early morning in September, but the realization of the promise still lies ahead, with the first retail delivery of Apple Watches not expected until sometime later in 2015. What is certain is that Apple has successfully moved the idea of a connected wrist health and fitness tracker from the niche arena of health conscious individuals to the mainstream “Joe Public”. Interestingly, even if Apple falls short this time, they have set in motion a great race with Microsoft, Google, Samsung, Fitbit and many others to fulfill and surpass the vision that we all saw in September. In 2014, world-wide revenue from the sale of wearables is expected to generate just $4.5 billion, but in 2015, expectations are sky-high with some experts predicting sales to increase as much as three times, fueled in the most part by the Apple Watch.

So why are Wearables a good thing for Insurance?

Fitbit productsThe rise of wearable fitness trackers as part of corporate wellness programs has been an emerging trend over the last 10 years. In the past, enlightened companies were giving out Fitbits to help employees track their own fitness. More recently, companies have been trading program participation and fitness data captured from such programs for discounts on their corporate health insurance. For example, Appirio, a San Francisco-based cloud computing consultancy, was able to get a 5% discount ($300,000) off their insurance bill in 2014, while BP America distributed around 16,000 Fitbits to employees as part of an integrated wellness program and claim to have put a brake on corporate healthcare cost increases by slowing them to below the US National growth rate in 2013.

A key ingredient to the success of these programs is the engagement of the members, so that healthy behaviors are encouraged and rewarded. In the BP example, the Fitbit data was easy to “gamify” due to the connected nature of the device, so that members competed on a number of challenges, including the “1 million step” challenge simply by wirelessly “syncing” their devices. Cory Slagle, the spouse of a BP employee, was able to trim $1,200 off his insurance bill through participation in this program – dropping nearly 32Kg, 10 pants sizes and reducing his high blood pressure and cholesterol back to normal range in just 12 months.

Vitality of South Africa has recognized the importance of a holistic health and wellness program for well over a decade and has built up an impressive array of statistics, including:

  • Participation in health and fitness programs reduces health claims by 16%
  • Logging fitness activities reduces risk by 22% for the most unhealthiest category of participants
  • Participating members are up to 64% less likely to lapse their insurance than non-participants
  • Participating members have up to 53% lower mortality rate than non-participants


Health & wellness opt-in rates are low

The only trouble is that participation in such programs remains miniscule with opt-in rates in some cases of just 5% for those eligible to join. Despite the programs’ value propositions being augmented with an affinity network of providers supplying goods and services at a discount for participating members, opt-in rates and persistency remain problematic.

A recent survey by PWC found that if the connected wearable device was free to the member, then about two-thirds said they would wear a smart watch or fitness band provided by their employer or insurer. Cigna completed a connected wearable pilot in 2013 involving 600 subjects which indicated 80% of the participants were “more motivated to manage their health at the end of the study than at the beginning.” In the US, United Health, Cigna and Humana have already created programs to integrate connected wearables into their policies, in order create reward systems based on data sharing. In one innovative program, a “wager” penalty system was found to be 3 times more effective in motivating healthy behavior, than the typical rewards these programs offer. The “wager” involved the member signing up to achieve and then maintain reasonable fitness targets over the course of the year to avoid the cost of the health screening being deducted from their salary.

Data Privacy a key concern

A key hurdle to overcome with the data generated from connected wearables is data privacy and security. Individuals want to know what insights are being generated from the data being collected and want to selectively share with the program based on the perceived value they get back. They also need to know that the data continues to be secure and private once shared. Apple is working this angle through its HealthKit, which is positioned as the data control room for consolidating and securely sharing health & fitness related data to selected parties. There are already in-the-field health trials in progress with Stanford and Duke Universities which are being powered by HealthKit. Google, Samsung and several others have also launched similar competing frameworks, so the data privacy issue is understood and being addressed by the technology companies offering products in this space.

A successful data driven life insurance program

I want to mention an innovative data-driven life insurance program, which currently doesn’t use any wearables, but easily could. AllLife of South Africa provides affordable life and disability insurance to policyholders who suffer from manageable chronic diseases, such as HIV and diabetes, and who sign up to a strict medical program. Patients get monthly health checks and receive personalized advice on managing their conditions. Data driving the program is pulled directly from medical providers, based on client permission. If a client fails to follow or stops the treatment, then the benefits will be lowered or the policy will be cancelled after a warning. The company assesses its risk continuously during the policy period, contrasting the approach of other companies that typically only assess risk once in the beginning. This approach allows AllLife to profitably serve an overlooked market segment and improve the health and outlook for their customers. They plan to cover over 300,000 HIV patients by 2016.

Ross Beerman AllLife

Ross Beerman – CEO of All Life

The video of AllLife’s CEO, Ross Beerman, on YouTube is quite inspirational and I recommend you see it. In it he outlines how the foundation of financial services is truly life changing for his clients – “our clients get healthier just by being our clients”. He also mentions the challenges of building an administration system to support AllLife’s customer engagement model.

A perfect storm for wearables

In summary, several intersecting trends have conspired to make this the perfect time to consider the launch of insurance programs and products powered by the new insights from the data being made available through wearable fitness and health trackers:

  • The whole fitness and healthy lifestyle perspective has entered into the mainstream culture
  • Devices like the Apple Watch have become fashionable objects of desire
  • The data from these devices is easy to capture and share – no forms to fill in
  • The data is of clinical quality, in at least some cases, and therefore useful for actuarial models
  • Insurers have already started to jump on the idea of “telematics” for humans for risk pricing
  • Feedback from this data is able to positively modify behavior to reduce health risks and improve the quality of life for those participating

I am still undecided if I’m going to be up at 1am again, this time outside the Apple Store, waiting for the Apple Watch to go on sale. However, the line outside the Apple Store that night could be very fertile ground for agents selling polices driven by the data these new devices will provide, if only companies act now and get their programs in place.

Thanks for reading and see you in the gym 🙂

Andrew Dart is a former Insurance Industry Strategist at CSC. Follow him on Twitter @ITInsuranceGuy.


  1. Hi Andrew,

    Thanks for sharing such an insightful article. I definitely agree with you that wearables could be a game changer for insurers. I have done some research in the past myself that I would like to share here.

    Nowadays, insurance companies often find themselves paying much more than what they collect through premiums, as a result of customers’ unhealthy behavior and the inaccuracy of the current risk model. Therefore, they are trying to find a way to encourage customers to maintain a healthy lifestyle and build a more accurate risk model to determine premiums. Using wearables and offering personalized premiums might just be the solution.

    There are 15 billion devices connected wirelessly today and the data collected with this huge amount of devices can lead to endless possibilities, one of which is to encourage healthy behavior. After all, a major portion of the $2.6 trillion health care bill is driven by behavior. By using wearables, customers could constantly be reminded to behave in a healthy manner, which would also make them eligible to personalized premiums, meaning that they would pay less than those who do not take good care of themselves.

    From an insurer’s perspective, this concept could also help increase brand awareness and attract healthy customers. Furthermore, the whole process whereby the premiums are calculated would no longer be a black box for customers and they would be happier to pay when they knew where the number came from. Lastly, early adopters of this advanced technology are also expected to differentiate from competitors and have an upper hand in winning the fierce competition.


    • ITInsuranceGuy says:

      Hi Lu,
      Thanks for sharing and I agree with you 100%. I have been promoting this same thought to the Insurance every chance I get. The combination of telemetric data feeds, Big data to analyze them and two-way communications between the Insurer and customer gives the unprecedented opportunity to change the risk equation and avoid claims. This is the new paradigm for Insurance. The more I look, the more opportunities I see. It is a wonderful business model, as it brings the strength of the Insurance company – risk management – to the very door of the customer, helping them to avoid claims. It makes customers partners rather than adversaries…something to which I think the whole industry needs to aspire.

      Thanks again for sharing.

  2. Virginia Hooper says:

    After many years of walking with crutches, I got my legs back and have been walking unassisted for 8 years. With my fitness band I am now up to 7-8,000 steps a day. I challenge myself to do ust a little more, find a hill etc. in 3 months my dog and I are both more active and I’ve lost 10 lbs.

    • ITInsuranceGuy says:

      Hey Virginia, that’s great news – you’ve made my day. I would love to know more about your story and what part if any your fitness band played in your recovery. Thank you for taking the time to read my post and sharing a little of your own personal success. Look forward to hearing from you.

  3. The insurance company’s duty is also in preventing bad health problems happened in the first place. That way will be benefit the company more right? Because there will be less claims or longer premium being paid. The insurance claim will also be harder as Apple watches you all the time! Nice move Apple.

    • ITInsuranceGuy says:

      Hi David. Thanks for taking the time to engage with me on this topic. I 100% agree with you that Insurance companies must get their customers to change behavior which will eventually lead to health problems. It doesn’t help anyone getting sick. However, your point on making claims harder, I think that’s true maybe for fraud, but I would definitely hope that given all of the data we are sharing, the Insurance company could speed up the settlement of legitimate claims. We have seen faster and pro-active claims settlement on motor insurance using telematics data, so Life and Health insurance should see a similar pattern.

      David, it’s a very interesting topic and goes to the heart of the shared trust that must be developed between the Insurer and customer for this kind of engagement to work. Thanks again for raising your concern.

  4. With all the focus on fitbits, iwatch and other wearable devices that monitor physical fitness behavior; I wonder if we are not missing a very important metric, and that is nutritional intake. What if there was a device that could measure caloric intake and type of caloric intake as easily as the physical fitness monitors/tools do? If there was a tool available to help people eat the right things and measure how many calories were being taken into our bodies and it’s affects, this would be a game changer. Especially, if it could measure and record as easily as the physical fitness tools/monitors are doing it for people.

    • ITInsuranceGuy says:

      Hi Jason, I have found a great free app for managing nutrition. It’s called Lark. It works on an Apple Watch and essentially it becomes a personal nutrition coach who you can talk to. Try it and let me know what you think.

  5. Most people rely on smart technology this days. They should know that this gadgets wont give them assurance that they will live healthy.

    • ITInsuranceGuy says:

      Hi Raye. I get what you are saying – yes these are just tools and it’s really up to the individual on how they use them. I think the main revolution here is that it is becoming easier to measure and track progress on a range of behaviors that will result in improved health if you stick with it. There is a whole new layer of technology that’s already starting to appear in Apps to proactively advise and encourage people to make healthy choices and I believe this is going to make a big difference to adoption and persistence. I am planning to write on this topic in an upcoming post. Until then take care.

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