Wearables and IoT in Insurance

AI, chatbots, telehealth and wearables help insurers know their customers and promote a personalized digital experience

The pandemic dramatically changed how people live, communicate, work and shop. COVID-19 has also changed how we interact with critical services such as healthcare and insurance.

In a time of change and uncertainty, customers are seeking reassurance and easy transitions to the “new normal.” Insurers that take advantage of the new data and customer insights this global digital shift has provided can better assess customer claims and applications and deliver a better experience.

Telehealth and telemedicine are booming as medical professionals take their services online. Additionally, 58% of US consumers have at least one smartwatch or fitness tracker in their household. These services track a wealth of data - daily steps, sleeping patterns, activity levels, heart rates, calories consumed, UV levels, temperature preferences, when people are home and not, distance traveled in cars, and more.

Revolutionary insights

Big Data offers revolutionary insight into a customer’s lifestyle, diet,, and general health. Access could enable insurers, health practitioners and users to better understand potential risk factors and even provide proactive rather than reactive recommendations such as encouraging health and wellness to avoid future health issues. Potentially, an insurer could recommend the insured go to an emergency room because of the acute risk of a heart attack.

Wearables and fitness-tracking technology have witnessed rapid growth in recent times. Gartner reports the global end-user spending on wearable devices will total $81.5 billion by the end of 2021, increasing 18.1% from $69 billion in 2020. 

Given the ability of technology to provide critical data, the wearables revolution continues to spark interest in the insurance industry. Data collected from wearable devices can provide vital health and fitness information. This information is critical to developing interactive life insurance policies that track fitness and health data through wearable devices and smartphones.

Data gathered can be used to give complimentary coverage or improved rates (where allowed) for both individuals and employee benefits using health and risk scores. Hence, the technology holds the key between insurance firms and technology-savvy clients who value a modern, updated experience and digital engagement. 

Wearables can also help insurers mitigate claims fraud and, more importantly, enable them to transmit data to warn customers of possible dangers in real-time. For instance, some IoT wearables can proactively alert people with diabetes on possible odd joint angles, foot ulcers, and excessive pressure so they can get treatment before things worsen.

Life insurance policyholders pay their premiums on average for 20 years. However, with the adoption and use of fitness trackers, they can lead healthier and longer lives. Lower mortality and morbidity can help insurers boost profits while improving insured health and wellness with predictive care and early diagnosis.

Similarly, internet-connected smart homes can help P&C insurers detect hazardous conditions and reduce losses for homeowners. For example, they could call the homeowner’s phone when a sump pump stops working during a rainstorm or send a text when there’s a break-in.

Conversational AI

Chatbots can help insurers lower costs on customer services and improve customer experience. Chatbots have become the leading application of AI in insurance within operations related to lead management and customer service. Additionally, using AI chatbots in insurance will lead to a cost savings of about $1.3 billion by 2023 across life, property, and health insurance.

Insurers can use chatbots to save their customer service teams time answering repetitive questions related to insurance products. For example, SHADE.ai’s chatbots can answer questions related to insurance products 24/7. In addition, their chatbots can assist clients in the onboarding process, help them navigate through policy details to find the product they want, and guide them from start to finish throughout the purchasing process. 

Managing Data Risks

The use of wearables and fitness devices comes with the risk of infringing on privacy. The insurer has access to private information whenever the customer is wearing a connected device. There’s also the risk of the information leaking to other parties. As a result, insurers and fitness devices must handle personal data with complete confidentiality.

Another challenge is the reliability of the data collected, as the devices may not always report accurate information to the insurer. Devices may be tailored to indicate the motion patterns like walking or running and may not record other activities such as cycling. The elderly may also be victimized by errors, as their exercise regimes may be less demanding.

While wearables create data safety and accuracy concerns, they can be managed with proper protocol. Insurers have always dealt with sensitive information and will need to continue to handle such data with care. For example, studies show that fitness data is evened out over time. A wearable device may not accurately read the user’s heart rate during fast-paced or high-intensity exercises. Still, it can offer a comparable average throughout the workout.

Live customer insights from data sources, including telehealth tools, wearables, and smart home devices, can help offset some of the uncertainties caused by the pandemic and improve the risk assessment process.

AI Completes The Picture

According to PwC, here are the key areas that AI can help with digital transformation.

A personalized customer experience

• Can improve efficiencies and automate existing customer-facing underwriting
• Enhance and personalize the customer experience
• Predict what customers need
• Personalize specific coverage

Underwriting:

• Automating underwriting in property, automobile, commercial, life, and group using IoT data
• Modeling: New business underwriting process and blocks of business renewals

Claims

• Robotic claims adjusting and payment with fraud detection
• Build predictive models

Insurers need AI to make the vast amount of big data from wearables, chatbots, and smart homes insightful and fully integrated with claims, quoting, and underwriting systems. AI can also help solve the problem of inconsistent data by detecting anomalies that aren’t meaningful. As a result, some vendors have added AI to their insurtech systems. There are various companies offering services for property/casualty, life, health insurance, and employee benefits insurers.

Now is the time for insurers to move ahead with digital transformation and leverage new data to reshape how they assess, price, and limit risk and enhance their customer’s experience.