‘Pay As You Live’ could be the innovation that re-invigorates the protection market, according to EY, as wearable technology becomes more prevalent.
Speaking to FTAdviser, the firm’s senior adviser for financial services Malcolm Kerr, said that when one provider gains enough traction then others will be quick to follow.
He explained the term follows from ‘Pay As You Drive’ motor insurance, or telematics, which is growing fast across the US and parts of Europe.
The solution helps insurers identify risk exposures and puts pricing control in the hands of customers, who can decide how much and how well they want to drive.
This takes the form of some hardware provided by the insurer or an app on the driver’s smartphone.
Policyholders receive immediate feedback through apps, emails and portals to keep track of their premiums, with evidence already showing that seeing the close correlation leads to changes in driver behaviour.
Mr Kerr said the same could be applied to protection cover, using wearable technology or smartphones to track exercise, footsteps, heart rate, BMI, sleep patterns, calories, training or diet logs, to provide immediate feedback to consumers and potentially their insurers.
“This will help to make protection insurance more interesting and interactive, you can already see people with Apple Watch’s comparing resting heart-rate or the amount of steps recorded on their FitBits.
“This seems like a great way to get young people buying insurance, as they can directly see the impact their lifestyle changes have on the price of premiums, and if it is helping people stay healthy then surely it is a win-win.”
EY cited the most recent forecast data from the International Data Corporation, that vendors will sell a total of 45.7m wearable technology units in 2015, up 133 per cent from the 19.6m sold in 2014.
The firm’s report into disruptive technologies stated: “PAYL is being actively explored by a number of our global clients - particularly those that already deploy PAYD products. We believe this concept will be a major area of innovation in the UK life and health markets.”
Last Autumn, FTAdviser first covered the potential for insurers using information from wearable technology, noting that PruProtect were arguably first with their Vitality healthy living initiative that uses customer health and lifestyle data to offer rewards and lower premiums.
A year later, LifeQuote suggested that insurers will begin to capture health tracking data for protection pricing along the same lines as has been adopted for private medial insurance policies.
Therefore, DirectLife’s protection portal and administration service is reviewing how best to capture health tracking data from devices like the Apple Watch and FitBit.
Currently, no protection insurer writing UK business uses individuals’ health tracking to price policies at outset, although LifeQuote’s sales and marketing director Neil McCarthy pointed out that engagement with the Vitality program during the policy term can certainly reduce premiums.