Insurers Turn to Wearables for Health Pricing, Raising Privacy Concerns
Insurers are exploring the use of real-time data from wearable devices to set health insurance prices based on individual behaviour, a practice already common in usage-based car insurance. This shift could incentivize healthier lifestyles and lower healthcare costs, but raises privacy concerns that policymakers are addressing.
Wearable devices like Fitbit and Apple Watch collect data such as daily steps, heart rate, and calories burned. Insurers like Humana, partnering with Apple, can use this data to offer discounts on healthcare premiums through apps like Humana Vitality. This approach, similar to Progressive Insurance's Snapshot for car insurance, rewards healthy behaviour.
Currently, federal law allows such data to influence prices only if it meets guidelines for employee wellness programs, with a 30% discount limit. Some employers already use this to offer rewards to active employees. However, a recent survey of 900 US adults showed nearly 60% would be more likely to use a fitness-tracking device for lower health insurance premiums, indicating consumer interest.
Insurers and public sector agencies can use this data for macro-level analysis and wellness monitoring, protecting privacy by stripping personally identifiable information. Policymakers, including those involved in legislation like the European Data Act and GDPR, are working to balance data access with privacy and security requirements. Actuarial justification in insurance allows insurers to price plans more accurately based on correlated behaviours and claim costs.
The integration of wearable data into health insurance pricing could lead to better healthcare outcomes and lower costs. However, it also raises privacy concerns that must be addressed by policymakers. As consumer interest grows and technology advances, the use of biometric data from wearables in health insurance is set to become more prevalent, reshaping the industry and its relationship with consumers.
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