How data could be used by providers

The device makes it possible for people to prove they drive safely, and future premiums are based on how safe and conscientious people are when driving, based on the average driver.

CapGemini predicts 36 per cent of automobile insurance carriers will use telematics-based usage-based insurance by 2020.

Similarly, FitBits, Jawbones, Garmins, pedometers and apps on people’s smartphones are all capable of tracking fitness data.

Wearable technology can note exercise, heart rates, sleep patterns, calories or body mass index (BMI) data.

It counts the number of footsteps taken - for example, at the time this guide was produced, FitBit and Garmin’s Vivoactive will buzz when the wearer achieves 10,000 steps.

CapGemini’s Top 10 Trends in Insurance in 2016 report has predicted that, after five years, the total expected adoption of wearable fitness devices will reach 47 per cent of people globally; 44 per cent will have a smart watch; 35 per cent will have a wearable heads-up display and 32 per cent will own smart clothing.

Although the cross-over between gathering and how this could be applied to insurance premiums is still at an early stage, providers are exploring whether wearable technology can track an individual’s health and fitness and assess this data for the purposes of protection policies.

Peter Le Beau, founder of consultancy Le Beau Visage, says: “The role of technology is vital because it can provide a range of important health and lifestyle measures, which can be fed into a premium computation.”

Tech could transform the UK insurance market but it is too early to tell until we see some innovative solutions redefining products Neil McCarthy

The market for wearable technology could change the individual or group insurance industry.

If wearable technology can encourage people to improve their lifestyle behaviours and reduce their health risks, then insurers can assess whether they can create better products or premiums as a results of using such data - so-called pay-as-you-live (PAYL) insurance.

Keith Aylwin, director in consultancy EY’s insurance practice, says: “In a nutshell, PAYL is the life and health equivalent of motor telematics.

“Wearables and other data-generators can be used in life and protection products, partly for pricing purposes but also for engaging the consumer.

“It has the potential - in theory - for daily priced insurance policies. The tech could price people’s activity daily and this could feed into a multi-coverage product, one that covers all sorts of risk - home, car, health. We could see the creation of a really exciting insurance product.”

That is the theory - but practically, technology is already being used by insurers for life and health.

According to Neil McCarthy, sales and marketing director for LifeQuote, the private medical insurance (PMI) market is already “rapidly adopting” mobile health tracking, rewarding those who have made significant strides to improving their health and lifestyle.

But product development is a long way off.

He says: “Tech could transform the UK insurance market but it is too early to tell until we see some innovative solutions redefining products. I am not sure that there is enough health information available that will create significant discounts on products, and data security will remain a problem.”

Yet Vitality has been collating such data to incentivise wellness and wellbeing among consumers for 10 years, and believes that consumers will become comfortable with data sharing, particularly if doing so leads to rewards, such as cinema tickets and other services.

Vitality refers to PAYL Insurance as the ‘Shared Value Model’, which as Tom Davis, head of research and development for Vitality, explains, is “trying to find a way to create value for the insurer, the insured and for advisers in the system.”

He says: “I think it is a transformation that has already started. The combination of using wearable technology and providing incentives to change can be very powerful.”

Of course, this only applies if the individual has the right technology and wants to share his or her personal data. As Mr Le Beau adds, “The product will be well suited to people who are into wearable technology and keen on quantifying health data that they are happy to provide.”

But as the CapGemini research shows, the growth of such technology brings opportunity for development, The days of ‘one-size-fits-all’, standardised rates and prices may not be completely gone, but they are going.