Tracking health through fitness apps and wearable tech has many rewards when it comes to reaching personal goals and improving quality of life. In response to this trend, a growing number of insurance providers are forging partnerships with various health apps to give their insureds motivation to live healthier lives. By enabling insureds to stay in shape, they offer wellness discounts and other benefits.
United Healthcare, for example, rewards users with healthcare credits for reaching fitness goals. Aetna monitors its users’ activity through wearable tech and offers rewards based off progress. Through AXA’s free Withings Pulse fitness tracker, users can receive discounts of over $100 on insurance policies and Withings products after reaching their steps goals. These are just a handful of the programs rolling out from insurers that are designed to improve claims cost predictions and strengthen a company’s competitive position.
But the role of wearables in private medical insurance is still…foggy, to say the least. In this day, insurers are tasked with finding a way to balance potential risks with rewards. This is not all that straightforward when faced with state-specific regulations, questions on the reliability of data, and concerns over costs and security.
Here are four considerations for insurers when implementing wearable technology programs:
1. Anti-Inducement & Competition Laws
When seeking new opportunities for implementing technologies that may guard against risks and provide real-time feedback to anticipate future risk, insurers must be mindful of regulations at the state level. Programs that incorporate wearables and other devices are automatically subject to scrutiny by jurisdictions with anti-inducement and competition laws. Many of these laws were enacted in the pre-wearable tech days. The intent was to protect consumers from being prompted to make “unsuitable” policy choices. The result: insurers were impeded from giving or offering an inducement at any level – incentives for using health trackers included.
That’s not to say that the landscape isn’t changing – in July of 2018, an amendment to Florida Statute §626.9541 revised the language on unfair methods of competition within the insurance industry to permit insurers or agents to provide insured items of value related to loss mitigation efforts. California also revised their anti-inducement provision in 1988. But elsewhere, programs that reward insured individuals for leading a “healthy lifestyle” and seek to roll out on a nationwide level would be in clear violation of anti-inducement and anti-rebating laws.
What is clear is that legislative changes are needed before insurers can provide devices intended to prevent and mitigate loss. For now, insurers can only assess and implement programs that are compliant with each state’s regulatory schemes.
2. Reliability of Data & Risk of Fraud
A major consideration for insurers is the accuracy of real-time data points on wearable fitness trackers. A recent survey from the Milliman Report found that while “wearables data can help insurers gain additional insight into the general fitness levels of its policyholders, the additional data collected might not necessarily improve upon existing claims cost prediction techniques.” Meaning: there is no definitive way to determine if wearables give predictive value. Devices frequently underestimate or overestimate activity levels such as steps walked, distance travelled, or calories burned. Not to mention the variations seen across devices – with Apple Watches, FitBits, and other tech exhibiting varying levels for the same activity.
A sensitivity analysis on Health Reimbursement Arrangement (HRA) data reveals that “although wearables may encourage members to increase their activity levels, many of the key factors that influence HRA scores (and hence members’ overall health levels) are not captured by wearables.” Cholesterol levels, whether a person smokes, and BMI all have a higher impact on one’s health score than any data a wearable can capture.
The question on the reliability of data leads way to a more serious risk: fraudulent methods to show higher rates of activity. There would be no real way for insurers to safeguard against users who are set on gaming the system. To this, though, Brooks Tingle, President and CEO of John Hancock Insurance, states: “These programs are going to be in place for an average of 20 years and often much longer, and while people might figure out a way to get more steps in the short term, people aren’t going to do that for two decades.”
Regardless, the potential for fraud paired with the knowledge that no single device tracker is uniform or 100% accurate indicates that there is a lack of evidence that implementing wearables is associated with better risks.
3. Public Perception & Privacy Concerns
On top of considering their own objectives, insurers need to balance the objectives of the stakeholders with the needs of the customers. It’s true that the digital fitness trend is on the rise, with up to 54% of millennials using sports/health apps regularly, and 46% desiring to know more about their personal health through real-time data.
However, a survey from the 2020 Milliman Report reveals some of the reasons why consumers would be wary of sharing their fitness facts. There are those who are against data influencing their premiums in any way, while others are more concerned about personal data security: not wanting data used for research or worries that data will be shared publicly. In this particular study, most of the respondents were actuaries or analysts themselves, and their more skeptical viewpoints might not represent the wider population.
For those consumers who are less accepting of the use of wearables in insurance decisions, an uncertainty about the proprietary algorithms any one device uses is primary. They wonder: How will the sharing of intimate data be handled? Will the insurance provider share this information with other firms? Understanding where the consumer comes from is vital because their perception impacts how easily users can be incentivized to participate in programs.
Because the truth is: less than half of customers pursue wellness programs, and less than a fifth of those follow through.
4. The Cost
Finally, insurers should closely examine the funding considerations of these programs. Not all wearable fitness devices are created equal, and certainly not priced the same. The latest FitBits go for around $80, while a high-end Apple Watch may cost upwards of $600, depending on the model. The costs and benefits (increased/decreased accuracy, level of durability) of different brands need to be given serious weight. When providing consumers with free or price-discounted devices, the accuracy of a device’s data tracking and whether those metrics influence long term health must be factored into the cost.
For more information on this topic, check out the resources consulted in this article:
What happens when life insurance companies track fitness data? by Angela Chen ~ The Verge