Why wearables are not the Holy Grail of group insurance underwriting – John Ritchie

It is fanciful to think data from wearables will be used in group protection underwriting, says Ellipse chief executive John Ritchie

Undoubtedly wearables are quite exciting. When I go out to see the global employee benefit consultants who bring life and disability schemes to us to insure, they often have a Fitbit or Jawbone on their left wrist, where I have a distinctly late 1980s-looking Swatch. So there must be something going on.

If you have had a smart meter fitted for your gas and electric supply at home, you will be familiar with the novelty of the first few weeks. You watch the running costs on the little screen and have a discussion with your domestic partner as to whether you can really afford to boil the kettle that often or use the tumble dryer every day. The novelty soon wears off though.

The idea that we will adjust premiums for employees in a group scheme using the data on their heart rate, blood pressure, sleep, diet and blood sugar levels is fanciful. It is better to think of wearables as part of the phenomenon of big – and readily accessible – data in the digital era. 

Whether in the pre-digital or current digital age, the issues with insurance remain the same. The friction in the process of getting cover and renewing it is the fundamental issue. The point of access, underwriting and charging methods have already changed but corporate and individual consumers want the same things. Most of all, they want life and disability cover to work like a utility in the sense that it is as cheap as possible, they are charged for it efficiently and in a timely manner, and it never breaks down. They want to be able to trust it and not think about it too much.

In group insurance, buyers, members and insurers will continue to want as little individual underwriting as possible. Furthermore, at the scheme underwriting level, progressive insurers want to reduce the number of pricing variables and use complete and reliable data that already exists.

Think of this as piping the data from existing sources such as auto-enrolment compliance systems and Companies House industry codes to establish what the relative cost for that scheme should be.

What we insurers crave most of all is big, complete data to enable experience analysis relative to those stripped-down pricing variables.

Data from wearables is of course self-managed and may not be that useful for the major mortality and morbidity pricing variables, with cheating an obvious possibility.

Wearables are an attractive benefit to help employees manage their own health and lifestyle with data. But that should not be conflated with material variables that underpin insurance pricing. The greater impact of big data and readily available cheap big data will be that products, assessment methods and administration methods will change dramatically. This has already started.

For the 0.25 per cent of our group life population whose covers spike out of their scheme, we currently achieve 86 per cent of cases fully underwritten without any third-party involvement – that is no GP report and third-party medical agent gathering data – and that is on high sums assured. We engage the individual in an online reflexive rules session under a banking-strength password done at a time and place of their choosing on our site. People rather like the process.  

As Underwriteme in individual protection markets is beginning to vividly illustrate, digital methods mean that you can economically underwrite and re-underwrite. That will change the shape of products.

Rather than be paranoid about communication with our policyholders prompting price comparison and lapses, we may turn that on its head and encourage people to engage with us so that they can take advantage of a refreshed selection period to keep their life insurance utility costs down.

I need to confess that my Fitbit has been ‘borrowed’ by my 25-year-old son. He is a research scientist who loves his data and, like many in his generation, is an enthusiastic trainer.

He is really enjoying it but I doubt that he is thinking about sharing his data for life and disability insurance purposes just yet.