woman wearing IoT-enabled watch with multiple health icons indicated

How wearables will bring health insurers closer to customers

When employers first began offering fitness devices as part of their corporate wellness programs at the start of this decade, they received an overwhelming response.

Tech market research firm ABI Research in 2013 estimated that employers would integrate millions of wearable health and fitness-tracking devices into their employee wellness programs by 2018.

Now, life and health insurers have jumped in with nationwide plans to link policyholders that track their exercise with cash rewards. For example, John Hancock is offering Fitbit devices to life-insurance customers and promising discounts on premiums of up to 15 percent to stay active. United HealthCare Group will pay nearly $1,500 annually to health-plan members who hit certain wellness and fitness goals. Oscar Health Insurance rewards members who track their fitness data with Amazon gift cards.

And the health insurers in the United States are not alone. Australian life insurance company MLC Ltd and South African health insurer Discovery Health are measuring users’ heart rates, sleep patterns and physical activity to offer them discounts. Several insurers are even experimenting with new models to use fitness data to set prices and engage customers.

What started as employers offering fitness devices to participate in health challenges is now promising to reinvent insurance companies’ relationship with their customers.

Gartner Research Director Angela McIntyre is responsible for assessing emerging trends for wearable electronic devices and advising executives on how to leverage these for new business and customer engagement. McIntyre says wearables are challenging the status quo when it comes to insurance and believes that “this is promising to be much bigger than just throwing a Fitbit at your employee to offer incentives.”

Here are the biggest changes insurers are currently exploring to push their members to a healthier, non-sedentary life:

Tapping into online communities

Online support communities designed to keep track of members’ workouts, calories and goals are sprouting up everywhere. Some insurers, are exploring how to tap into these communities to motivate their customers using wearable fitness devices, says McIntyre. “I expect to see insurance companies [using] such communities to encourage their policyholders to compete with their friends in fitness challenges and events like charity runs,” says McIntyre.

Providing real-time health advice

Insurance companies are gradually moving beyond step-count goals to track enrollees’ health profiles continually. The next logical step should be to dole out health advice, maybe on a real-time basis. “The idea is not far-fetched,” says McIntyre, who expects insurers to use members’ fitness and wellness data to provide insights on diet and exercise. “It might take some time, but as analytics gets better, insurance companies could build apps that advise you to run faster or slower and to keep your heart rate in the right zone,” she says.

Personalizing goals and rates

Health and life insurance premiums are typically set based on aggregate profiles, but fitness devices could play a big role in changing that. As insurers come to know more and more about customers’ health, firms could determine customers’ risk factors better and price them accordingly. The one-size-fits-all health premiums could give way to customized pricing, and that’s not all – they could soon set personalized goals for people.

“Right now, insurance companies expect all participants to meet the same goals. What about people who have health problems? We might have personalized and very complicated plans when insurance companies start incentivizing goals based on your health or fitness profile,” explains McIntyre.

Partnering with fitness clubs

Fitness clubs and gyms seem to be a natural ally to an insurance company trying to motivate people to use wearable health-tracking devices. Several gyms already use these sensor-embedded devices to offer incentive and rewards programs. For example, HumanaVitality tracks members’ health data and awards gift certificates for reaching predefined goals.

“I have heard from insurance companies that are considering partnering with health clubs. And some are thinking of setting up their own,” McIntyre says.

The pros and the cons

Better health outcomes and lower prices are beneficial to both insurance companies and customers. Wearables will help insurers drive a deeper engagement with their customers, with real-time advice that might also help their customers be more proactive about their health. And the healthier customers get, the less an insurance company needs to spend on them.

However, there are some important questions to consider as this becomes the new norm. Customers will have to consider the privacy risks — online and otherwise — they’re taking by using a third-party app or device to provide detailed health information to a health-insurance company. Will this trend ultimately change the conditions of customers’ healthcare coverage? Will people in wheelchairs, or people who have more sedentary at-home lives, or people with conditions that prohibit vigorous exercise, ultimately be punished with high insurance premiums for what may appear to be less-active lifestyles?

“Theoretically, it’s quite possible and suspect that a person won’t get a job because he’s some kind of a couch potato,” Forrester analyst JP Gownder told Computerworld last year. “These new devices are opening up all kind of categories for potential discrimination.”

And for insurance companies, there are substantial ethical and legal headaches to be mindful of with detailed and real-time access to employees’ personal health data. Insurance companies will need to install the necessary safeguards to protect the influx of personal information being received through wearables, and the government may need to oversee this process to ensure compliance.

Redefining the customer experience

Whether wearables in healthcare and health insurance are an enduring trend will be a test of time, but for now they’re changing the game. Fitbit CEO James Park has described insurance companies as “the holy grail of this whole category.” According to Park, the partnership between wearables and insurance providers is “going to be a huge inflection point for the business.”

What’s clear is that what’s happened so far in this space — namely rewards programs and building customer health profiles — is only the beginning of how insurance companies are redefining their relationships to customers.

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