Step and save: The truth about wearables and health insurance

Over the past few years, mobile devices and wearables have been passively or actively tracking a huge amount of personal data about us. Equipped with sensors from heart-rate tracking to GPS, they routinely capture all kinds of metrics and store them whether we like it or not.

When it comes to matters of health, insurance providers get very interested – and many see fitness trackers as a way to sell more premiums. A recent survey revealed that 63% of insurance executives seeing wearables having a 'significant impact' on the industry, and that their use in premiums would be 'wide-spread' in just two years.

It's not unrealistic. There's a powerful incentive to proving that you lead a healthy, non-sedentary lifestyle: it leads to perks and reduced premiums. As Vitality, which offers such a program in the UK, puts it: "The healthier you get, the more we're able to offer you. It's a virtuous circle that's good for you, good for us, and good for society."

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However, the use of fitness trackers in insurance comes with two key issues.

Firstly, there are practical problems. What if you're unable to fulfil the needs of the tracker for a period of time? And of course, there's the problem of data privacy. What will happen to your health information, and what if it reveals something that makes it undesirable for the company to insure you?

We take a look at wearables and the insurance business.

Wearables saving the insurance game

Over the last year Oscar New York insurance company started supplying customers with a Misfit Flash and offered users $1 credit every time they hit their step goal, with rewards in Amazon vouchers of up to $250 a year.

Then came John Hancock, which offers its users Fitbits and the potential to earn 15% off their premiums for hitting targets. The potential for growing customers with this attractive offer led the company's CEO to tell the New York Times that this new model could "reinvent" the "no-growth insurance industry."

It's no wonder the insurance companies are jumping on the wearable bandwagon, but has there been evidence that these nudges towards healthy attitudes have worked?

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Prudential's Vitality Health is a firm using wearable data in the UK, offering its life insurance customers points that can be spent on rewards such as cinema tickets and free coffees, alongside reduced premiums. They've been supporting pedometers since 2006, expanding to include heart-rate monitors, cycling computers, swim monitors and step tracking apps.

"Uptake has been high, and gets an additional wave of interest each time new apps and tracking devices are added," said Nick Read, director of Vitality Wellness.

"Most wearable devices will see a big drop off in usage, because there is no incentive to stay engaged. But members who use wearable devices in conjunction with Vitality are twice as likely to still be engaged with their device after a year."

The rewards help too – on average, Vitality members record 790 more steps per day, than those using wearables outside of the Vitality ecosystem.

A win-win situation

If incentivising populations can make a difference to serious global health issues like obesity and diabetes, then harnessing wearable data is arguably a benefit. However, outside of the black and white world of marketing copy though, is giving up this much detail about ourselves for a quick buck really a good idea?

Emma Carr from Big Brother Watch believes that voluntary compliance can often play on a lack of information:

"Privacy Policies and Terms and Conditions are incredibly thorough. But we as consumers just don't have the time or the legal knowledge to read them in full and understand them. There could be anything in there. Those Ts and Cs, and Privacy Policies, are like that because it protects the companies legally.

"Clearly, if an insurance company thinks there is data there that will make their algorithms more sophisticated, then they are going to want to have access to that data. There is an argument that shouldn't be the case - that a right to privacy should override the accuracy of the information that insurance companies have on you," she said.

Data is already on the sales list

One company looking to improve fitness with wearable technology, but without the corporate interest is Bounts, which offers vouchers and coupons for taking part in healthy activities. It links to the likes of Jawbone and Fitbit, but also to RunKeeper, Strava and even some gyms that take part.

Founder John Stuart tells me that funding comes from "organisations who wish to motivate their public or members", after initially getting off the ground with help from Oxford University, the European Space Agency and "some socially minded individuals."

Because the data is obtained directly from the wearable owner's data collection, Stuart sees Bounts' members as making a conscious choice to share their data – a process which involves manually connecting each one in the settings. What's more, Stuart believes there's a trust, obtained via the understanding that the company aren't selling personal information.

"It would be complete suicide for Bounts to get a reputation for selling personal data," Stuart explained – but did admit that some data was for sale already.

"We do leverage the data we hold but it is the aggregate, non-personal data e.g. Males, between 30 years old and 40 etc.," he explained.

What's more, Stuart adds, the trackers that Bounts work with make it pretty straightforward to control the quantity of data shared, and to withdraw should customers wish.

"Each of the trackers we work with shows their members who they are sharing data with and the extent of that data share. If they don't want to do it anymore, they can disconnect."

Should you sing up?

For now, with single function devices like Fitbits and Jawbones having their data analysed on a purely voluntary basis, it's hard to see anything too sinister in companies rewarding their healthier instincts.

Ultimately if your privacy matters to you, no EULA is too long to read. As Carr warns: "There needs to be a general understanding that if a device is connected to the internet, then more often than not you are going to lose control over the data that you and your device has collected."

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Check those agreements, and if you can save hundreds of dollars a year on your insurance, it's for the individual to weigh up the pros and cons.

But as wearables become more complex, and heart rate, cholesterol, stress and more detailed and private information starts to usurp simple steps – the picture becomes much more complex. How this will evolve is less clear, but while we're certainly years away from the dystopic nightmare of being turned down for life insurance because Apple detected a heart-rate abnormality – for many, we're on the the first step of the ladder.

If you're interested in what your personal fitness data could mean to big businesses, check out our feature The Worrying Potential of Wearable Data