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Should Fitness Trackers Affect Your Premiums?

Posted on November 06, 2015 by Guy Weismantel

 Digital Insurer Blog

The Digital Insurer podcast:


As you can likely attest either through personal experience or by looking at the person’s wrist next to you, pedometers, heart rate monitors and other fitness trackers are nothing new, but in recent years they've been integrated into multifunction technology devices. Once runners had to buy a special wristband or attach a dongle to their shoelaces, but now anyone with a modern smartphone is likely to have some form of fitness tracker. With support like the Health app added to Apple's iOS 9, today's millennials no longer need to go out of their way to track their fitness.

The Digital Insurer Fitness

More and more we’re seeing this as an opportunity for health insurers to attract customers while cutting the risks and costs of covering medical expenses. Just as most insurers offer premium discounts for customers who give up smoking, and some even offer deals for those who join a gym, there could be a market for those who perform a certain amount of exercise. While exciting, this concept raises several questions the industry will need to address.

Crunching the Numbers

While smoking or not smoking is a binary choice (few insurers offer rewards simply for cutting down), there's an almost infinite range and variety of fitness activities and levels. Calculating how much fitness activity makes a real difference could be tricky. New health insurance agency Oscar decided to keep things simple and offer Amazon gift cards to customers who walked a set amount each day rather than trying to recalculate premiums based on activity.

Another question is whether the health benefits of increased fitness activity will stick. For the most part, people who manage to quit smoking will be non-smokers for the rest of their lives and enjoy a significant reduction in the risk of illness. Anyone who's made and broken a New Year's resolution understands that fitness fads can soon fade, and the benefits quickly disappear.

Practical Problems

There's also the security risk of patients tampering with equipment or hacking data to give false readings. Fortunately, this should be a minimal risk: Weigh the savings the customer makes on premiums against the savings an insurance provider can make if they discover a reason to refuse a payout for medical treatment. Chances are good that insurers can afford to pay whatever it takes to outwit such trickery and prove liability.

Finally, there's a practical issue. What happens if customers decide to switch phones or change operating systems when changing carriers? Any monitoring system will need to be cross-platform to avoid leaving customers with a dilemma.

Conclusion

With all these factors in play, it may be the brave insurer that tries out discount-for-exercise policy options. Don't be surprised if the bigger firms choose to stand back and let smaller and specialist insurers take the initial risk.

But make no mistake—the trend is clear and more and more, younger people will be willing to trade their data for a discount.  The key will be to see which insurer is able to latch onto this trend and attract these new customers.


Mr. Weismantel is the Vice President of Marketing at Vertafore. With 20 years of marketing and financial leadership in companies such as Microsoft, Business Objects, Baxter HealthCare, Caremark International, and Expedia, Guy’s career has focused on bringing differentiated products to market and providing the “compelling reason to purchase” for customers and prospects alike.


Guy has a Bachelors Degree in Accounting from the University of Notre Dame, and a Masters Degree in Business Administration from the Kellogg School of Management at Northwestern University.

 

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