The Legality and Legality of Wearable Data for Insurance
The data generated by wearable devices can provide a much more complete picture of an applicant’s health and lifestyle. This information can be used to improve underwriting risk assessment and reduce the time required for manual underwriting.
The program could encourage customers to be more active, saving insurance companies money and potentially lower rates. However, concerns about fairness and discrimination could keep low income people from participating.
Does Your Insurance Company Have Visibility of Your Health Data?
Insurers would be wise to consider the potential for incorporating wearable health data into their risk assessment and underwriting programs. However, leveraging this new source of data is a complex undertaking that requires evaluating predictive models, understanding medical advances, and integrating customer experience. In addition, there are potential risks associated with reliance on this data that could prove unreliable such as safety recalls or privacy complaints.
To add to the complexity, insurers must also decide whether this information should be considered HIPAA-protected healthcare data. Reis explains that the only way data collected by wearable devices would be covered under HIPAA is if the device partnered with a covered entity such as a hospital or doctor’s office.
Is It Legal?
There are a number of significant challenges to using wearable data for insurance purposes. In particular, the quality and reliability of the data varies widely between devices and there are few standards for analysing such information. This makes it difficult to apply in underwriting and requires a major investment of time, money and expertise.
Additionally, underwriters need to be careful about giving too much credit to the data from a wearable device. For example, if an applicant knew their data was being evaluated they might improve their behavior leading up to the application process to make themselves look better. This is known as the Hawthorne effect and is commonly seen in weight loss programs where people lose more weight when they know they are being monitored. This is also a concern when insurers are offering rewards to policy-holders based on their activity level.
Is It Safe?
A major challenge is ensuring that the data collected is accurate and reliable. A failure of the technology could lead to product recalls and consumer complaints. Insurers need to be sure that the technology can reliably provide information that supports their underwriting philosophy and rules.
Insurers need to be able to evaluate the wearables’ accuracy and determine how much credit they should give them for an applicant’s health-related risk assessment. They also need to decide whether to use the wearables’ results along with the application’s medical history, prescription histories, digital lab records and motor vehicle reports.
The other question is how to integrate the wearables’ data with the insurer’s existing underwriting processes. Garth notes that wearable devices are more than just smart watches and Google Glasses. Examples include a baby pacifier that monitors an infant’s activity, and a wristband that tracks your heart rate in case of cardiac arrest. These technologies might help reduce the information asymmetry between applicants and underwriters, resulting in more granular risk differentiation and reduced anti-selection.
Is It Effective?
Wearable devices provide a unique opportunity for insurers to capture and analyse activity data to improve their risk assessments. These data can be used to supplement current information and ratings factors such as BMI, blood pressure, cholesterol, family history, credit, motor vehicle records, etc., resulting in a more granular and accurate underwriting assessment and improving mortality experience.
While few life insurance companies ask for self-reported physical activity, some do offer policies that reward applicants who demonstrate healthy lifestyles with lower rates based on their wearable data. However, such programs can be difficult to manage and require the insurer to develop effective strategies to encourage customers to continue their healthy behaviors.
A significant challenge to the use of wearable data in underwriting is that the technology does not currently offer a way for insurers to validate the identity of the wearer and confirm that the data belongs to them. Without this, there is a significant risk of anti-selection that can affect long term underwriting performance.
OnePhenix is the only IPAAS software that connects your wearable data to your healthcare professionals. www.Onephenix.com.au
References
https://www.sydney.edu.au/news-opinion/news/2022/06/21/is-your-insurance-company-watching-you-online-and-is-it-legal-data-privacy.html