The Trust Factor in Utilizing Wearables for Health Insurance Programs

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One of the big talking points around wearables has been the use of wearables data by health insurance companies. On paper, it’s a win-win for everyone, with lower risk for insurance providers and customers leading healthier lives.

Corporate wellness programs are feeding into this trend, with large companies like BP and Autodesk having given out free Fitbit devices to their employees to encourage healthier lifestyles. Startups like Welltok, Welbe, Jiff, and Limeade are delivering innovative services that allow companies to track the health of their employees, to encourage their wellbeing, and have them be more productive. Many of these services are delivered to employees through fancy mobile apps that also link to wearables. Most of the corporate wellness activity is limited to the self-funders that run their own in-house insurance programs and remains separate from the large insurance providers that cater to individuals.

While the big insurance companies are monitoring and even trialing programs using wearables, a new kind of insurance provider has emerged that is using technology and wearables as a building block to differentiate from the pack.

Oscar Insurance, backed by big venture funds like Founders Fund, General Catalyst Partners, and Khosla Ventures, is putting a stake in the ground by offering a branded Misfit step counter device to its customers, beginning in January 2015. This is not a trial, but a live commercial offering where Oscar will give customers opt-in incentives like Amazon gift cards when they reach a targeted number of steps daily or weekly. The Misfit device communicates with Oscar’s app to track progress and rewards.

Rather than offering to reduce insurance premiums, Oscar has chosen to focus on a rewards-based approach. This model is known to be working for corporate wellness customers, but has not been tried in the individual private insurance space. Oscar promises not to use the data in its own review process or penalize customers for bad health data, or make the program mandatory. In other words, Oscar is asking wearable users to trust them.

While the intentions of Oscar seem good, there are a number of privacy concerns about how insurance companies might use wearables in the future. The scariest one, in my assessment, is that of a live insurance marketplace, where wearable body sensors are continuously feeding stats to enable a dynamic premium model that changes with the quality of your health data. This is the “Big Brother” scenario where you are constantly tracked on what you eat, drink, how you sleep, and how active you are. Taking this even further, your health becomes a commodity that can be traded in a market just like stocks.

The debate can go into extreme scenarios, but the reality is that the wearables-driven quantified self movement will move steadily into a data monetization phase, whether that is rewards-based or some other model. The initial signs of that transition are happening as we speak, with Oscar taking a bet on wearables driving their business model. We are also likely to see some sort of dynamic premium marketplace emerge in the future, but for it to function it will have to be highly regulated with safeguards around data privacy and misuse. A lot depends on the political landscape in the United States, and who takes the White House in 2016.

Wearables have been criticized as being a fad, where early adopters have abandoned them after a short period of time. The rewards-based incentive scheme might just get people to abandon them less often. It will also lead to people trying to game the system by faking wearables data. So, trust works both ways, and its important to have mechanisms that prevent misuse from both parties – the insurer and the insured.

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