Smart devices have been a revolution since their introduction. Smart technology has evolved from the tablets and phones that we own and love, to wearable devices such as fitness trackers and telematics devices that are installed on our vehicles. The link between these devices and our lifestyles is growing daily. In addition, they will be a major influencer when it comes to insurance policies and assessing and pricing risk in the future.
Insurers have been looking for ways to gain deeper insights into their client’s lives, now they have significant amounts of data at their fingertips. The relationship between wearable devices and insurance was discussed by Kumar Utpal, Regional Sales Manager of In2IT, at the recently held Insurance Technologies Conference.
Value chain management
While the link between wearable devices and insurers are not immediately apparent, Utpal pointed out that these devices provide insurers with key opportunities to add value to their products and services.
“The first key area that insurers will find an advantage in is marketing campaigns. Once they know what their client’s behaviours and their purchasing habits are like, they can refine and target marketing campaigns in a way that will make clients feel as if insurers are adding a personal touch to messages. The second area where insurers can find value is in product development. If they know what their client’s habits are, they can design products that will benefit them on a personal level. The days of blanket cover is rapidly fading into the sunset,” said Utpal.
The third area where insurers can find value is in risk management. A recent industry survey pointed out that 74% of respondents believed that differentiation in the insurance market will become more focused on risk management and prevention services than on the price of compensation-based insurance.
Further, 87% of respondents of the same survey (who were insurers) believe that shifting value-added services to the core of their business proposition would provide a much better chance of establishing platforms that would draw clients to their company.
The kingpin
Perhaps the biggest area where wearable technology will benefit insurers is in the healthcare industry. Healthcare is expensive and being admitted into hospital for any kind of medical procedure is a costly exercise for medical schemes.
“The cost of medical equipment is high and there are no clear guidelines on how doctors or specialists establish their rates. Consider this: three patients are in a hospital ward. The doctor sees patient one for two minutes, patient two for 20 minutes and patient three for 45 minutes. At the end of the day all these patients will currently be billed the same amount. How long will medical schemes stand for this practice?” asked Utpal.
Utpal pointed out that if smart and wearable devices were installed in hospitals, medical schemes could monitor how long a doctor consulted with a patient, how long a medical procedure or surgery took and the level of care that patients needed. They can then sit with doctors and scrutinise their costs based on this information. This will give medial schemes a major advantage in the fight against fraud, waste and abuse.
“It will not be long before this is a reality. In future, medical schemes may fund the installation and establishment of smart hospitals so that they can manage their costs. India and several countries in Europe already have a system whereby specific hospitals are exclusively affiliated with insurers and not open to the general public. Managing costs can reduce the cost of healthcare and can encourage financial inclusion,” said Utpal.
The future is now
The popularity of wearable devices has grown significantly in recent times, and the future for the industry looks bright.
“In 2015, the wearable technology market was worth $19,6 billion. The market is increasing at a rate of 16,2%. Therefore, by 2022, the market will be worth $57,7 billion. Twenty percent of North American population already make use of wearable devices and companies investing in this technology include (among others) Apple, Samsung, Garmin and FitBit. How long will it be before insurers join the party?” asked Utpal.
Editor’s Thoughts:
Who would have thought that there would be such an important link between wearable devices and insurance? This is the value of Big Data where even minute details can provide significant value. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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