Wearables

Last Updated 2/9/18

Introduction

Wearable devices, or devices incorporated into items of clothing or accessories worn on the body, are one of the latest trends in consumer technology. These devices are small enough to wear and include sensor technologies which collect and deliver data such as vital signs and location. Examples of popular wearables include the Fitbit, Apple iWatch, and the baby monitoring device Mimo. Insurers have taken a keen interest in wearables because of the huge amounts of data they collect and the potential for harnessing this data to better assess risk and tailor business approaches. However, wearables have expanded from fitness trackers to devices collecting a far greater range of health data. It is unclear who exactly owns the data and if companies are sharing the data generated by wearables. While consumers like the potential benefits wearables promise, there are concerns related to the potential for privacy invasion and security breaches.

Wearables and the Insurance Industry

Wearable technology achieved mainstream popularity with the Bluetooth headset in 2002, although some older technologies like hearing aids are considered wearables as well. Between 2006 and 2013, iconic wearable technology devices like Nike+, Fitbit, and Google Glass were released. Wearable technology is now more popular than ever. One in five consumers wears a piece of this technology on their wrist daily. Since 2010 Fitbit has sold more than 38 million devices while Apple holds the largest global share of wearables market as of 2017. The rise in wearables reflects an increasing desire to know about and manage our own health. According to a 2016 study, 65% of people think technology has an important role to play in health and wellbeing.

Wearable technology has already entered the life and health insurance space. Health professionals are using wearables like smart or implantable devices for patient monitoring, diagnostics, and drug delivery. When enabled with analytics, wearables can be used by consumers to manage their health and by insurers and employers to improve wellness.

Some of the potential uses of wearable technology in the insurance industry include underwriting, risk management, new product development, workers’ compensation, and claims management. Life insurers could use wearables to replace or supplement medical exams often used in the underwriting process, reducing costs and improving data quality. Both life and health insurers are exploring the use of fitness tracking wearables to incentivize physical activity and other healthy lifestyle choices. Lastly, some wearables can relay real-time information to assist in claims processing, capturing video, pictures, or audio to document property damage or take statements from witnesses.

Concerns

As with many emerging technologies, issues of consumer privacy with wearables are chief concerns. These devices collect a huge amount of data, including data considered protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA). However, in many cases it is unclear who the data belongs to (the consumer or the company) as well as how the data can be used, shared, or sold. With cybersecurity attacks on the rise, there is also a possibility this data may be stolen or exposed.

Another concern is the lack of information or testing about the accuracy of data collected by wearables. As these wearables are generally not considered medical devices, they are not regulated by the U.S. Food and Drug Administration (FDA). A number of studies have compared various wearables for tracking physical activity and results showed large variations between different devices. The accuracy of data generated is a concern since fraud could easily be accomplished without sufficient protections like fingerprinting or other identification measures.

Finally, wearables have created interesting legal issues for litigants. Because wearables present new sources of personal and physical data, legal experts have started to recognize wearable devices as the human body’s “black box”. Data from these devices have already been used in several personal injury claims cases.

Status

The NAIC’s Innovation and Technology (EX) Task Force is charged with monitoring emerging technologies like wearables in the insurance sector. The Task Force provides a forum for discussion of innovation and technology developments in the insurance sector to provide resources for and educate state insurance regulators on how these developments impact consumer protection, insurer, and producer oversight. Additionally, the NAIC Center for Insurance Policy and Research (CIPR) conducted a webinar entitled “Wearables and Their Implications in Insurance” in 2017. The webinar provides an overview of wearable devices, explores some of the benefits and challenges, and discusses their insurance implications. A replay of the webinar is available free of charge on the CIPR website.