Your IndustryFeb 4 2016

Potential for individual protection market

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Potential for individual protection market

Harnessing the power of wearable technology within the UK insurance market could be a ‘game changer’ for individual lives.

According to Peter Le Beau, managing director of consultancy Le Beau Visage, the so-called Internet of Things (IoT) - a network of physical objects that contain embedded technology to gather information about specific objects and can transmit that information- can make things a lot easier for the individual and his or her adviser.

He says: “It will make it much easier to transact online. It will substantially reduce medical costs and the time taken to process applications. It might form one part of the market - perhaps not entirely remove existing products - but it may be a game changer.”

Of more benefit, perhaps, than improved processing, is a reduction in premiums.

Paul Avis, marketing director for Canada Life Group Insurance, says: “At an individual level, there is the basic premise of premiums going down.

“With single premium costing (SPC), each life generates its own costs with a specific premium that relates to each individual. So if an individual’s behaviours lead to improved health this could lead to a reduction in the premium.”

Neil McCarthy, sales and marketing director for LifeQuote, says pay as you live (PAYL) insurance could work by an insurer assessing the risk of an individual at the point of entering an agreement, “and review the terms based on the actual risk presented at the time, and during the term of any policy”.

While reductions in individual premiums are obviously a “good way of encouraging and motivating” people to live healthier lives, Tom Davis, head of research and development for Vitality, says other incentives can benefit the individual.

Worldwide, Vitality encourages people to get fitter through regular ‘incentives’ such as free cinema tickets or cheaper gym membership.

So which individuals would benefit from a move to pay as you live protection?

Le Beau Visage’s Mr Le Beau says: “This is a product which will appeal to younger, tech-savvy people who try to cultivate healthy lifestyles and who are happy to share their health data if it enables them to get a preferred rate”.

Vitality’s Mr Davis disagrees somewhat, believing older people are a great target market.

“Wearables work well for older people who enjoy regular modest activity, such as walking. Earning discounts on insurance premiums by taking walks can be an attractive proposition for older clients.”

Keith Aylwin, director in EY’s insurance practice, agrees.

He says: “The spectrum of people to whom this could apply is broad - from the traditionally less healthy to those who go to the gym regularly.

“It could also help those who suffer from conditions such as diabetes, for example, who if they can use tech to help improve their lifestyle, there is no reason they should not be classed by their insurer as a more healthy person.”

CapGemini’s research on the Internet of Things predicts the number of such devices will reach 29.5bn globally by 2020.

This averages out at 4.1 devices per person. But devices can be expensive - some range from $16.99 (£11.85) to $249 (£173.6) for a Swarovski Shine lady’s fitness tracker.

Can individuals afford the tech that could result in a cheaper premium? And given that some premia are available for £10 a month, would it be worth the initial outlay?

Maybe not yet, but as technology improves, cheaper options will become available.

Some insurers might even provide free or subsidised trackers with certain policies, while the benefits attached to individual policies might make it worth the customer’s while.

And, as Vitality’s Mr Davis says, all you need is a smartphone.