Privacy Implications of Wearables in the Insurance Industry


Tractica has covered wearables in the insurance industry in a previous blog post featuring Oscar Insurance, which has been using wearables to incentivize and reward customers who live active and healthy lifestyles. We continue to track this trend in a recent white paper showing a number of other insurance companies like United Healthcare, Discovery Health, and MLC offering wearables to reward healthier living, but also to reduce insurance premiums. However, the advantages of wearables in insurance go beyond just the customer and reduced insurance costs. The benefits can be mapped to different functions of the insurance industry – front office, policy services, underwriting and pricing, and claims.

LifeInsurancePost has recently put together an interesting infographic covering the various benefits of wearables in insurance. While most of these benefits seem straightforward, there could be privacy implications for some of them and as such they could be controversial. Key considerations for the various functional areas are outlined below.

Front Office – This is the sales, marketing, and customer service aspect of insurance. Wearables can play an important role here with the insurance company being able to segment its customers by lifestyle and activity levels, based on the wearable data collected. This should lead to better customer targeting and promotions. However, there are privacy implications here when dealing with real-time customer feeds and the front office having access to specific individuals’ data. Anonymity of the data is almost a mandatory condition for insurance companies getting access to the data.  Both HIPAA in the United States and the GDPR law in the European Union are making it harder for companies to get access to wearable data that has not been anonymized. Therefore, it’s hard to see a situation where customer service agents have access to real-time feeds.

Policy Services – This is part of the customer service and customer experience area that could see massive improvements by utilizing wearable data. However, once again it’s important that the wearable data is anonymized and the notifications being sent to customers don’t seem to target customers or make them feel uncomfortable about being watched. Categorizing services and optimizing internal processes by customer segment is possibly the biggest advantage for insurance companies as they streamline their businesses and help provide a better experience to their customers. Automatic updates to the policy holder database is also controversial, unless there is full and complete trust from the customer on what is being updated. Ideally, there should be a review of the data by both the customer and the insurance company before any changes are made to the customer’s database record.

Wearables Insurance


Underwriting and Pricing – Insurance companies can use wearable data to improve their pricing, launch new products including some targeting specific customer segments, and improve overall sales and profitability. While insurance companies have started to implement programs that would provide discounts on premiums, which could be counted as a bonus, having penalties is much more controversial and could act as a deterrent for customers. Also, providing special discounts to customers who share their personal data goes counter to the privacy laws like HIPAA and GDPR, which would end up creating two segments of customers  — one group that has no privacy and gets cheaper insurance and the other group that retains privacy but doesn’t necessarily get the best price. This is equivalent to discriminatory pricing, which will be highly controversial.

Claims – Wearable data is a powerful tool against insurance fraud, even when data is anonymized. Using artificial intelligence (AI) and machine learning, insurance companies can identify groups of people or specific markets that are seeing fraudulent activity, or data that is going counter to specific claims. However, at the same time it is possible to generate wearable data fraudulently, which could in turn be used to generate or support false claims. Therefore, while wearables can act as a deterrent to existing insurance fraud, they could also be used for new types of fraudulent claims.

Overall, there are clear benefits for insurance companies to utilize wearables. The largest benefits are related to having more engaged customers, improving internal processes, and optimizing costs to serve customers better. However, there are privacy implications around the wearable data, and before drawing up a strategy for implementation, insurance companies need to think hard about the public relations (PR) impacts of launching a wearable campaign and how the strategy would be perceived in the market. Data anonymity is key to implementing any wearable strategy within insurance and healthcare, and therefore careful consideration must be given to both the the legal and PR aspects of wearables data.

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