Emerging Technologies

Wearables In Insurance

Balancing value & vulnerabilities

by Mark Breading

Mr. Breading is a partner with Strategy Meets Action, a Boston-based research and advisory services firm exclusively serving the insurance industry. Connect with him thru e-mail: mbreading@strategymeetsaction.com. Reprinted with permission.

We hear a lot about wearables these days … smart watches, glasses, fitness trackers, helmets, and a myriad of other smart devices. These wearables incorporate sensors and chips for data collection, real-time analytics, gamification, and other features.

But as the use of wearables increases, so do the concerns about security. Privacy questions arise because the wearables may disclose information about the wearer’s location, health status, or other confidential information.

In addition, there is the chance that hackers might tap into the synched iPhone or Android apps, and steal or misuse Personally Identifiable Information (PII) or sensitive medical data. There are a number of issues that insurers and others who plan to use these devices should consider: What data is being collected? How will the data be used? Is the data encrypted? How strong is the encryption? Can it be shared with other organizations or law enforcement agencies? Encryption is not universally required or provided. Some wearables and related apps come with encryption. But there are many that do not.

Security Vulnerabilities

Unfortunately, security vulnerabilities exist in a number of areas. Data that is sent from a wearable device to a nearby smartphone may be exposed during transfer via Bluetooth or WiFi connections.

If a device is stolen, thieves may be able access wearables-related data. Some devices (such as the initial Google Glass) touted open designs, but they have already been hacked.

And the jury is still out on the security of the new wave of devices like the Skully motorcycle helmet (180° blind spot camera, heads-up display), the MyEposome wristband (tracks chemical exposure), the Oculus Rift virtual reality headset, and a whole host of others.

While it’s true that in some cases the information collected or transmitted is relatively benign, there may be other cases where it is highly private and sensitive. There are also vulnerabilities in how the data might be used. The laws and regulations governing the use of data generated by wearables are lagging behind the tech capabilities.

What data is being collected? How will the data be used? Is the data encrypted? How strong is the encryption?

Once data is collected, stored in the cloud, and used by the apps maker and other businesses, anything goes. For example, right now the health related data collected by wearables is not covered by HIPAA Privacy Rules, although that is likely to change. The NAIC is also working through regulatory guidance for the use of consumer data.

Wearables and the Insurance Industry

The broad question is, “What do wearables mean to the industry?” The answer is multi-faceted.

Companies need to consider how wearables can provide new product and service options, how they might change the customer experience, and how the new data collected might provide new insights on customer behaviors, needs, and risks.

Presently, wearables have the highest customer potential in health and life insurance. Fitness trackers as a part of wellness programs are becoming popular. Down the road, there is potential for wearables in workers’ compensation for rehab, monitoring, and return to work criteria.

There are also possibilities of real-time blood glucose monitoring for diabetics, and monitoring and providing alerts for other diseases. Some future wearables with insurance implications include smart digital tattoos, digestible microchips in pills, smart bandages, smart clothing, connected shoes, and augmented reality glasses for driving.

According to an SMA survey, 6% of insurers say they are using or experimenting with wearables today. Another area in which insurers will have great opportunity to leverage wearables is improving employee productivity and operations.

Claims probably holds the greatest potential at this point. Insurers are already experimenting with outfitting adjusters with smart glasses. And the possibilities for smart helmets, toxic-chemical-sensing wristbands, and smart clothing are many.

The ability to access information real-time and leverage multi-media recording, GPS location, and visualization capabilities is a natural for adjusters in the field. According to an SMA survey, 6% of insurers say they are using or experimenting with wearables today, and 22% are developing a strategy.

So, what should insurers be doing to strategize and prepare for the impacts of wearable technology? First, make wearables part of innovation initiatives or innovation labs. Second, launch pilots to test the use of wearables, and encourage employees to get experience with the devices.

Finally, consider establishing venture capital funds to fund and/or partner with start-ups. The value of wearables for the insurance industry is significant. Early implementations and pilots are just the tip of the iceberg. Just don’t underestimate the security vulnerabilities of the devices and the data. Insurers would be wise to understand and carefully monitor these issues, including tracking and influencing the legal and regulatory environment related to wearables.