The good news for insurers is that this is already possible. Consumers who previously were put off from protection insurance by intrusive health and lifestyle questionnaires are now giving their personal data away to wearable device and mobile phone fitness apps such as FitBit and Strava, in return for the ability to track their own health or compete to be the fittest in their sport. US insurer John Hancock is exploiting this and has decided only to sell life insurance to customers willing to track their health on wearable devices.
Will we see this model take off in the UK? It seems likely. Hancock has built its wearables proposition in conjunction with Vitality, a protection provider which already has a strong profile in the UK as well as South Africa. Consumers have already bought into the wearable ecosystem, with predicted global sales of 125 million wearable devices in 2018 and potentially 800 million in use by 2020. Coupled with the built-in capabilities of mobile phones you have a powerful driver for uptake of wearable-linked insurance.
The advantages to some consumers are clear: lower protection insurance premiums based on taking proactive steps to improve their fitness – something that wearable-users are already inclined to do. According to Vitality, wearable-users live between 13 and 21 years longer than ”couch potatoes”. But as we know, where there are winners there will be losers and these will include people who are not necessarily able to be more active. People with existing disabilities or conditions, and those without the budget for an Apple watch may find themselves confined to an increasingly small selection of firms prepared to insure them. These same firms will be left with an insured portfolio disproportionately swayed towards higher risk customers and will have to charge much higher premiums to cover their costs.
An Equality and Human Rights Commission study notes that disabled people are only half as likely to be in work as able-bodied people, and on average are paid between 7% and 13% less. If wearables insurance becomes mainstream, this indicates that those with physical disabilities may find themselves priced out of the protection market, while Strava-mad athletes reap the benefits. We risk undermining the fundamental principle of insurance - the pooling of risk – at the expense of some of those least able to pay the price. With the FCA keen to ensure vulnerable customers are not treated unfairly, over-dependence on biometric data risks crossing the line into disability discrimination.
But there is another way. Fiona Macrae recognised this when, in 2005, she couldn’t find travel insurance after recovering from breast cancer. She responded by setting up InsuranceWith.com. This service was specifically designed to deal sensitively with customers with pre-existing conditions, and the firm works to provide affordable insurance based on the actual risk rather than the perceived risks associated with each condition. In short, Macrae has identified a segment of the travel insurance market at risk of exclusion and created a new niche product; insurance which genuinely treats the customer fairly.
In part 2 I’ll be talking about insurance and mental health
 Equality and Human Rights Commission: Research report 107: the disability pay gap, S. Longhi,
Institute for Social and Economic Research, University of Essex