Navigating the wearable minefield
Wearables offer a raft of opportunities for insurers, but implementing them isn’t a simple task. Here’s what insurers need to be wary of before they jump on the bandwagon:
The ethics of collecting personal data
Insurers have always dealt with sensitive data, but never on this scale. Figuring out very clear ethical boundaries for managing that much data is essential. Holding personal data is a great responsibility, and any mistakes could destroy the trust that makes the insurance industry function.
A combination of best practice data security, and very clear rules about how the data can be accessed and used must be established and followed religiously.
Are customers actually interested?
Insurance products that use wearables rely on one huge assumption: that consumers want them. If consumers are unwilling to share that much personal data then the whole proposition falls over.
It is possible that the average consumer does not want their behavior to be constantly monitored by their insurance company. Most of us aren’t honest with our own mothers when it comes to taking care of ourselves, why would we want yet another eye over our shoulder, tutting with every donut and missed gym date?
The answer is, of course, that the incentives need to be strong enough. If customers don’t feel compelled by the promise of future reward, they won't buy in. Whether it's better premiums or monetary rewards for meeting targets, incentives need to be significant enough to be worth it.
Data management capabilities
The depth and breadth of biometric data that can be captured with wearables is immense, but completely useless if insurers don’t know how to best manage and analyse the data.
Currently, most companies are barely scratching the surface when it comes to utilizing the data they already have. This means up-skilling is essential. Whether through hiring or internal training, the skills within an insurance company will likely need to be improved when it comes to data science.
Watch for the rule breakers
Of course with any system, best intentions can easily go awry. Insurers need to be aware of the propensity for humans to try and manipulate things to their advantage.
While it’s likely that the vast majority of customers will play by the rules, there will be some that don’t. This means insurers need to have a system in place for those few that try to ruin it for everyone else. Of course, devices like smartwatches have inbuilt fraud prevention features like the ability to recognise their wearer and alert for any abnormal data, but it always pays to be more than one step ahead.