How Insurers Can Maximize the Wearables Opportunity
According to a recent report by Accenture, 63 percent of surveyed insurance executives believe that wearable technologies will be widely adopted by the insurance industry within two years, and 31 percent say they are already using wearables to engage customers.
I can’t say I’m surprised by these statistics from the “Accenture Technology Vision for Insurance 2015” report. Sapiens’ life and health customers and prospective customers are increasingly asking how to plan for and leverage wearables, which will be owned by 33 percent of U.S. consumers by the end of 2017, when investigating appropriate insurance software systems.
The insurance industry has already started to run with this opportunity. Cigna, a global health insurance service, teamed with Samsung to jointly develop health and wellness-related features on the company’s mobile devices. And John Hancock Financial recently became the first U.S. insurer to offer discounts to policyholders who wear Internet-connected fitness trackers.
Insurance companies can reap many potential benefits from integrating with wearable technology. First of all, healthier, more active customers will require fewer appointments, tests and hospital visits. Perhaps most importantly, health coverage decisions will be formulated with the latest and most accurate information, reducing insurers’ exposure to risk (which will of course lower their costs).
Wearables can be used to increase customer loyalty and strengthen insurers’ brands, via popular apps, gamification and social media. And usage-based insurance (UBI) programs, based on data from wearables, will enable insurers to provide more personalized programs and enhanced customer service.
For instance, John Hancock Financial is offering customers who sign up for a new life policy a Fitbit (a bracelet that can track activity, exercise, sleep, etc.). The more these new customers exercise, the bigger discount they can receive on their insurance premium (up to 15 percent). Usage-based insurance (UBI) is already having a significant impact on the property and casualty/general insurance market. By putting wireless devices in cars, insurers are monitoring risky driving behavior and rewarding good drivers with lowered premiums and preferred rates.
Not So Fast…
Before reaping the benefits from wearables, insurers will have to carefully consider their strategies and take a few necessary steps:
- Complete their digital transformation – using wearables to enhance and personalize the customer experience will be virtually impossible for an insurer lacking full digitalization capabilities.
- Formulate a digital strategy– insurers require a comprehensive strategy that maximizes today’s digital and Internet of Things (IoT) capabilities to improve the customer experience.
- Be open – it’s unclear who will emerge as the wearable technology industry leader, so open integration is crucial.
- Effectively manage data – mountains of new data will not be helpful if insurers are unable to effectively sort through it, find the valuable information and quickly apply it.
- Secure data – some insurance customers will be nervous about their personal health information falling into the wrong hands. Increased security investments will likely be necessary.
Two important notes regarding the steps above:
- Although securing data is vital, insurance providers will need to be careful not to let security and regulations turn into a barrier that prevents them from fully embracing new technologies. Research shows that customers are willing to wave privacy rights in exchange for tangible value (financial or other). For example: Orange, one of the world’s leading telecommunications operators, conducted a study (Future of Digital Trust) that found that consumers place an approximate value of €170/£140 on the worth of their personal data to businesses.
- Insurance customers will soon expect a seamless and personalized experience. As Tom Benton, vice president of research and consulting with Novarica, wrote on LinkedIn, “(Today’s customers) will likely expect IoT devices to respond to their presence and gestures, and that wearable sensors will anticipate their actions and needs. As consumers, they will expect products and services to be provided to them in a way that is personalized to their current situation and environment.”
Insurers who follow the above tips can maximize the wearable opportunity.