Soon, fitness bands, IoT devices may decide insurance premium

Smart devices, or IoT-enabled devices such as fitness bands that monitor your daily activity and speed trackers in vehicles, could soon play a part in deciding your insurance premium.

A report by a working group set up by the Insurance Regulatory and Development Authority of India (IRDAI) has batted for the use of wearable devices for life insurance and health insurance policies as they can provide a regular stream of data about the policy holder.

“Insurers may develop frameworks/models using wearable data throughout the life cycle of the insured and help in building attractive product propositions, and also monitor experience throughout the policy term,” the report noted, adding that for health insurance such devices can play an equally crucial role as insurers, at present, only have a point in time data through medical tests or self disclosures.

The working group to examine innovations in insurance involving wearable or portable devices was set up in January this year, and has examined a range of devices, including fitness bands, skin patch sensors, smart contact lenses, medical e-textiles and even implantable devices.

Similarly for non-life insurance, such as motor cover, the report noted that the use of IoT devices and Artificial Intelligence would not only help improve assessment of underwriting risk by tracking the driving habits of the insured, but can also lower fraud risk and improve claim handling.

Accidents, burglaries

Movement sensors and IoT devices can also be used for home insurance to track accidents and burglaries.

It has suggested that life insurance companies may consider launching specific products where pricing may be decided on the basis of wearables and data generated from them, or can enable an option in their products to have premiums linked with the dataset or outputs from technologies such as wearables. Insurers can even partner with device manufacturers, and customers can buy their own devices based on the policy specification.

The report has, however, noted challenges for data mining as well as data protection.

“The critical piece of the wearables puzzle is linking wearable metrics to claims experience. To derive any meaningful correlation between these two pieces would require substantial data points,” it said, adding that the services of third party or reinsurers would be required. Data privacy regulations for wearable devices would have to address the issues of consent, usage, customer access and disclosure, the report further said, adding that the consent of the customer to share data is a must for participation in such products.

COMMENT NOW