The adoption of wearable technology will have a significant effect on insurance markets, according to pricing analytics provider Quadrant Information Services.
Market research firm CCS Insight recently updated its predictions on the wearable technology market, stating that 411 million smart wearable devices will be sold in 2020. The number represents $34 billion worth of sales and a 143% increase over wearable sales in 2016.
The high adoption rate of wearable technology is what Quadrant Information Services believe will affect insurance markets.
Michael Macauley, CEO of Quadrant Information Services, said: “The insurance industry is based on data—an understanding, in the form of actuarial statistics, of the behaviours and risks inherent in the markets we serve. The field of remote sensing and control devices, generally known as telematics, represents a new way to collect and amass data about the people we insure. By giving direct feedback to the user, it also offers the possibility of reduced risk and improved outcomes for our customers, both as individuals and as populations.”
Macauley says that health coverage has already been affected by wearables, stating that in 2014, oil company BP offered the overweight husband of a BP employee an opportunity to reduce his annual insurance costs by wearing a fitness device to monitor his exercise. By using the device, the individual lowered his annual insurance costs and other companies followed suit with similar programmes.
Macauley does however state that the insurance has a lot of factors to consider when using wearables and users’ data to negotiate insurance premiums. He said: “The insurance industry needs to be sensitive to these concerns, and be vigilant in guarding against data leaks and hacking. That said, it is clear—and must be made clear by the industry—that the qualitative and quantitative data obtained by wearables will produce significant benefits for consumers. It will help give them the best individual policy possible and, as in the examples cited above, in most cases will lower their rates. For insurers, it will provide a degree of understanding of their markets that they can now only dream about. It’s a win-win.”