Wearable technology and its insurance implications

Even if you’re not familiar with the term ‘wearable technology’, it’s likely you’re familiar with the devices themselves. Wearable technology can be broadly defined as small electronic devices that are in some way worn on the body. These devices are often able to track, collect and store various data, such as the driving, exercise and other behaviours of the people wearing them.
The wearable technology market has grown rapidly in recent years, as more and more people come to recognise the convenience and benefits these small devices can bring. In a survey conducted by PricewaterhouseCoopers (PwC) last year, 49% of respondents owned at least one device.

As the popularity of wearable technology grows, so does its considerable potential to impact the insurance industry, both through the opportunities and risks that it presents.

What devices are available?

  • Smart watches – with capabilities that extend far beyond timekeeping, these devices are effectively a portable computer worn on the wrist. They can usually be connected to smartphones, offering up a variety of tasks such as schedulers, GPS maps and audio streaming, and some models can even perform full smartphone functionality.
  • Fitness and biometric trackers – these devices can monitor and record data on various aspects of your health and fitness, including steps taken, heart rate, calorie consumption and even sleep quality.
  • Connected pets – wearable collars are now available, allowing pet owners to monitor the exercise and eating habits of their pets, as well as use GPS to track their movements and alert them if they stray too far.

Insurance implications

Wearables present an opportunity to better understand customers and, as a result, tailor products and services to their specific needs. The data collected by wearable devices could also be used to better understand and manage risk, and to improve underwriting and the claims process. For example:

  • The opportunity to draw valid assumptions about the safety and health of a pet via the data from their smart collar provides insurers with valuable insight, which could be used to gain a better understanding of the type of cover needed by different pet owners. Insurers could also use this data to enable customers to influence and take control of their own premiums, much like telematics.
  • Wearable technology could be used in the claims process to provide tangible evidence. For example, in a claim for a damaged or stolen smartphone, a connected smart watch could provide data on exactly when and where the connection between the two devices was broken, either to substantiate or invalidate the individual’s version of events.
  • Another potential benefit of wearable technology for insurance lies in its ability to work in combination with vehicle technologies. An example of this may include a wearable device which is able to measure a driver’s stress, fatigue and blood alcohol levels, which could then interact with the vehicle and affect control settings or issue warnings to the driver.

As with all technology, however, there are possible risks which must also be considered:

  • Driver distraction – the biggest cause attributed to driver distraction has been the increasing presence of technology in our lives. While focus is usually placed on smart phones and the associated dangers of texting behind the wheel, wearables could present a similar threat to road safety.
  • Privacy and data use – as many wearable devices are capable of tracking, logging and sharing personal data about a person, they automatically raise questions about privacy. If a criminal were to gain access to this extensive personal data it’s possible they could  track your movements and analyse your daily routine, leaving you vulnerable not only to data theft but also physical theft.