Insurance policies have existed for thousands of years and were initially invented to protect goods being shipped long distances. Today, the options available to us have expanded tremendously, and it’s even possible for soccer players like David Beckam to insure their legs.
Despite this, the business of insurance and how it’s managed hasn’t evolved as rapidly. And this is understandable, as it’s a highly regulated industry, so reliability and dependability are hugely important.
Consumers today demand customized and real-time service with everything, from food and entertainment to clothing. Cookie-cutter health or life insurance feels incredibly outdated when compared to so many other made-to-order services available today.
Reacting, Not Preventing
When you break down how your health, disability, or life insurance coverage works, it’s very reactive. We can purchase a broad range of coverage, choose our deductibles, and even choose our providers, but one aspect remains the same: when illness or injury occurs, only then do we engage with our providers. There is no added incentive for us as customers to live a healthier and safer lifestyle (beyond the obvious), that would benefit both the insured and the insurance provider.
This is a missed opportunity when you look at the data. According to a new report from Accenture, nearly six in ten consumers would be willing to share significant personal information, such as details on their lifestyle or location, in exchange for lower pricing.
There are dozens of relevant data sources potentially readily available for this purpose. Wearable devices have become increasingly popular in recent years. And these devices can measure everything from your activity to your sleep. But still, most insurers are still using paper forms that are filled out at most, once yearly.
This kind of robust data can make it possible for an insurer to better identify risk factors and create more granular customer segments. Access to this level of customer lifestyle and health data can even make it possible for insurers to incentivize good behavior such as getting a full night’s sleep or exercising for 30 minutes daily.
Usage-Based Insurance
What has emerged based on this perspective is a new model called usage-based insurance, which leverages customer data to create a more granular view of a customer’s risk profile, ultimately creating a more customer-centric insurance model. It’s reported that this can generate a 40% reduction in claims and policy administration costs.
There are several ways to achieve this, but it will require insurers to embrace technology and digital transformation. It will also require consumers to be open to sharing more data about their lifestyles.
Some companies have already begun moving aggressively down this path. John Hancock is one of the biggest and most established North American life insurers, and it announced in 2018 that it would be incorporating a new focus on providing interactive policies that track fitness and health data. It does this with wearable devices and smartphones with the permission and participation of each insured individual.
The company claims that policyholders have been shown to live 13 to 21 years longer, and also incur 30% lower costs related to hospitalization.
Wearable technology has become recognized for its ability to help individuals increase healthy behaviors. But when incorporating this information into the information provided to an insurer, insurance companies can stay informed of the habits of their policyholders. This can include information about diet, exercise, or sleep, and allow them to adjust the plan accordingly.
Health IQ is another firm making similar changes but in a different and less invasive way. Health IQ instead rewards by assessing their health literacy. This allows customers to provide additional personalized information without necessarily wearing some kind of monitoring device or providing real-time information. This is also appealing because it means that customers with poor health in their family history can put in the work educating themselves, and avoid having their family health history impact their premiums.
A World of Data
We now live in a world with access to more data about our health than we’ve ever had, making it easier to create more personalized health and life insurance plans than would have been possible in the past.
The real-time nature of wearables also provides us with instant feedback, making it possible to more easily identify positive and negative behaviors and how we can act to correct issues. Wearable and remote monitoring technology has drastically advanced in recent years, but when it’s to be used for such an important purpose as this, it must be accurate and operate seamlessly.
This requires proper integration and connectivity and is likely to include the development of an effective application programming interface (API) strategy. Plus, with this kind of private, personal information being transmitted, It’s also important to ensure that new regulations around data and privacy are not only followed but also built into the system itself, with the ability to be updated automatically.
With the right technology, insurance has the potential to become a proactive tool to improve behaviors, help us benefit from the positive changes we make and improve our own well-being.
About Ryan VanDePutte
Ryan VanDePutte is an Associate Director at Bits In Glass where he is responsible for managing and executing the full delivery and implementation of custom Appian solutions for Bits In Glass’ clients. He has nearly a decade of experience providing project and portfolio management as well as strategic guidance and advisory services for some of the nation’s largest health care companies.
