Insurance Meets Tech
In a study of 997 Amercians, it was found that 2 out of 3 would be willing to adopt health insurance wellness programs based on wearable devices, particularly if they have benefits related to health promotion, disease prevention, or financial incentives. In another survey conducted by Nationwide, 65% of customers said they would allow a telematics device to capture their driving behavior if it provided a discount. Similar to retail and manufacturing companies, insurance companies have begun to turn into hardware and data aggregator companies.
Insurance companies have shifted from looking at past statistical models to using the internet of things (IoT) in order to predict future outcomes. This method is called the “pay what you risk model,” and uses telematic and wearables sensor data to enable lower premiums for less risky behavior, such as driving less and exercising more. How does this work? In the auto industry for example, insurance companies, such as metromile (MILE), would issue a tracking device to the customer that logs information such as location, miles, and speed to determine the risk of that particular driving instance. If the driver travels a short distance and follows all traffic rules, then their perceived risk would decrease along with their premium. This example is applicable for most forms of insurance. For health insurance companies, providers like Axa, offer up to $100 in discounts, when customers allow data tracking from a customer’s apple watch or fitbit and log their individual exercises or their heart beat over time. With shipping insurance, companies like Parsyl, use cameras and trackers placed inside and outside of a container to determine the risk of a fire or burglary based on habits and placement of certain items.
Benefits of using the IoT for insurance does not stop at the costs. Filing, processing, verification and reimbursements for claims can all be expedited. If a driver gets in a car accident, trackers on the car can determine who was at fault and where the damages occurred. Additionally all of this can be filed and paid out without having to deal with multiple phone calls with representatives using smart contracts. As mentioned in our NFT blog, smart contracts help mitigate the risk of manipulation by the mediator and increase transparency using blockchain technology which logs all of the interactions of both parties. Lemonade (LMND), a NY based insurance company, is using smart contracts to cut out the middleman, and has lowered time and costs for itself and its customers.
Saving time and monetary incentives are enticing arguments for these trackers, but they come at the expense of privacy. Insurance companies will continue to push the limits of policy holders to see how much data they can give them in exchange for more discounts. The boundaries will be tested very soon as insurance companies such as Neos, a home insurance company that sells cameras and motion kits, have already begun to offer discounts to customers who install their devices inside of their house. Some devices like heart and blood glucose monitors can be personalized as implants that assess risk for medical issues such as diabetes, high cholesterol, and high blood pressure.
The system overall is also not a perfect fit for everyone. For example, a safe driver that enjoys road trips would get penalized in this model, as well as a person who has a physical disability may not be able to supply their daily steps to an insurance provider. A blanket device that covers all users does not exist yet, so insurance customers that are weary of this shifting industry can still rest easily knowing that the old way of doing things will still be around for the foreseeable future.
With that being said, the future of insurance will be very interesting to watch as time goes on. More advancement in the technologies being used, whether it be devices, artificial intelligence, or blockchain will make insurance less costly, more efficient, and more accurate. How far these advancements go will be determined by how much data customers will be willing to give up.
Sources: Emerj, Bankrate.com
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