"Wearables" are electronic devices worn on the body that generate, store and electronically forward biometric data in real time to smartphones, tablets, laptops or other electronic devices.
What information do wearables provide?
Wearables provide a wide variety of biometric data including: EKG and arrhythmia detection, pulse and variability, blood pressure, respiration information, blood sugar level, muscle activity, sleep patterns, body temperature, blood oxygen levels, skin conductance levels, brain activity, hydration levels, posture, eye tracking data, ingestion and fertility information.
Who uses them?
Demographics from a Nielsen report indicates that almost 50 percent of wearable technology owners are between the ages of 18-34 with almost a third having annual incomes of over $100,000. This is an extremely attractive target market that statistics show is underinsured by billions of dollars.
How is the data used today?
Fitness monitoring is a common use for wearable devices.
"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.' Apple's first wearable device – the Apple Watch, will change our lives." — Andrew Dart, "The Case for Connected Wearables," March 26, 2015
Microsoft, Google, Samsung, Fitbit and many others are scrambling to catch Apple in this new and lucrative market. In 2014, world-wide revenue from the sale of wearables was roughly $4.5 billion. 2015 expectations are that sales could triple, fueled for the most part by the Apple Watch, launched in April 2015, says Andrew Dart in "The Case for Connected Wearables," Asia Insurance Review.
Corporate and personal wellness initiatives to improve overall health are a common format for wearable device utilization. A Harvard University study found average savings of $3 on medical expenses for every dollar spent on wellness, which is quite an incentive for corporate America to provide not only wellness programs, but also the wearable devices needed to monitor progress, say Katherine Baicker, David Cutler and Zirui Song, in "Workplace Wellness Programs Can Generate Savings."
Games are commonly used in these wellness programs including competitions with rewards such as cash incentives, discounts on health care items, and charitable donations linked to achievement levels determined by the wearable biometric data generated.
The Internet-of-Things includes telematics used in automobiles. It is basically a wearable device for your car. Property and casualty insurers are using telematic device data today for automobile coverage. Discounts can be earned provided the data shows good driving habits, and higher premiums are being charged if adverse data is developed.
Speaking at an industry conference, Direct Line's group marketing director, Mark Evans said, "We use technology for motor insurance; black boxes [in cars] enable people to get discounts because they can tell us they are safer drivers. You move from claims data to actual data." Evans was referring to telematic data. The time of day, location, temperature, weather conditions, acceleration, braking, speed and hard cornering can all be tracked.
The Internet-of-Things biometric data from wearables has protective value that can be utilized by life and living benefit insurers for marketing as well as risk assessment purposes.
How accurate is the data?
The veracity of the data generated is a concern since fraud could easily be accomplished without sufficient steps in place to prevent it. ID verification measures could include retinal scanning, fingerprints, or other unique identification criteria. Strapping a Fitbit onto your dog and letting him run around the backyard could be quite tempting if the cost savings from the data generated were substantial.
Fitness monitoring devices are not considered medical devices and therefore are not regulated by the U.S. Food and Drug Administration (FDA). That being the case, the precision of the data can be dependent upon such things as the manufacturer, conditions of usage, customer's physical size and condition, and the quality and functionality of the specific device.
Given the conservative nature of the insurance industry and its resistance to change, these concerns will cause slower adoption of wearable data than use of the devices by the general public.
Data privacy and security
Some in the industry have expressed privacy concerns about wearable data. "All of a sudden, everything you do and everything you eat, depending on which bits of the information they collect, is sitting in someone's database," says Anna Slomovic, lead research scientist at the Cyber Security Policy and Research Institute at George Washington University and a former chief privacy officer at Equifax and Revolution Health.
This is a key hurdle to overcome. Research shows millennials are more likely to be willing to share data than their older counterparts. However, individuals still want to know what insights are being generated from the data being collected and want to selectively share with insurers 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 addressing this with a product called HealthKit. It was developed to serve as the governing system so that only appropriate parties receive the data. HealthKit trials are under way at Stanford and Duke Universities.
Google, Samsung and several others have also been working on the issue. It is clear that the question of data privacy is a priority issue being actively answered by the technology companies offering wearable devices.
