The future of Life Insurance

Technology is invading every aspect of our life, from the way we spend our spare time to the way we communicate to the way we commute etc. Many new businesses like online shopping, app based taxi hailing services, food ordering services etc have come into existence thanks to technological innovations. Life Insurance too is seeing this impact of technology. In the future, life insurance companies too will adopt technologies that will enable more customization and are more customer-centric. Some of the life insurers in developed countries are already leveraging on new technology, and changing the way in which Life Insurance business has traditionally been performed. A game changing innovation is discussed here-under:

Wearable devices are devices that can be worn by a consumer and often provide information related to health and fitness. They can on a real-time basis measure your heart rate, blood pressure, steps taken in a day, calories consumed, blood sugar level, stress level, exposure to sun light, distance travelled and even your sleep patterns. Some of the wearable devices available in the market are the Apple Watch, Xiomi Mi Band, Samsung Galaxy Gear S2 and Fitbit. 

The health and fitness related data transmitted by these devices are being used by some life insurers in developed markets to enhance their product offerings and interactions with the customer. And, how is this being done?

At the pre-issuance stage, lifestyle, fitness and daily habits data from these devices is helping insurers narrow down more number of customer groups. Based on the risk profile of each group, best suited products can be marketed. The health, fitness and lifestyle related data of the wearable devices also helps in bringing about a high element of customization in product development.

At the underwriting stage, wearable technology can usher in the concept of continuous underwriting as the health-related data is available on a real-time basis. Companies may offer flexible/lower premiums during renewal if some set health targets are achieved. For eg: Normal blood pressure, blood sugar level on a regular basis. Incentive/Penalty programmes can also be introduced to motivate customers to achieve the set targets. These initiatives can help improve the customer’s overall health and the insurance companies are benefited with lower claims.

At the policy administration stage, a customer can be notified in case the data reveals any adverse health condition. For eg: If the data shows irregular heart beat or high blood pressure, the customer can be alerted so that remedial measures are immediately pursued. Thus, the insurance companies can notch up their level of customization in their customer interactions as they can communicate with each individual customer as per their specific data.

These are the some of the ways in which wearable devices can alter the way the life insurance business is conducted. However, they also bring about a set of challenges. Considering the volume of data being generated by these devices on a continuous basis, companies will need a robust infrastructure to receive, store and manage all the data. Scalability of systems will need to be considered as wearable technology advances and modifies. It will also be a challenge to extract the strategically important information from the enormous data available. Checks will have to be put in place for data security to prevent data leakage which is a major threat to organizations today. Currently very few insurers are making use of wearable technology and as the usage increases many challenges unknown as of now may crop up that can impact the business. So, insurance companies will also need to have a plan to mitigate the impact.