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That Morning Run Recorded On Your Apple Watch Can Help You Save On Your Insurance Premium

Jul 08, 2018 | 2 years ago | Read Time: 4 minutes | By Manan Vyas

Wearable Technology

Next time you are sitting in a restaurant, bus or in a park take a quick look at the people around you: apart from the obvious smartphone, wearable technology seems to have become an indispensable part of people’s lives. From Apple Watches to FitBits, from the Google Watch to Jawbone, people have made these devices a part of their everyday life. The multi-functionality and easy usage of such devices, not to mention their compact size are some of the reasons for their increasing popularity. Globally, the revenue from the wearable electronic market is estimated to increase to about $11.6 billion by 2020, with a CAGR of about 25%. With the technological infusion in every industry, such wearable devices, a lot of which aim to help promote sustainable and healthy lifestyles, have become a very important part of the insurance industry, with advantages not only for the insurers but also for the customers.

What exactly are wearables?

At the very outset of it, wearables can be defined as any electronic devices which can perform several computing functions and are incorporated into items of clothing and/or accessories, such as the Apple Watch, FitBit amongst several others. Such devices help in tracking physical and health-related activities of people, while also offer other features such as the ability to listen to music, respond to messages, make phone calls, use navigational features to name a few. Wearables also use body sensors in order to help users track and monitor their health. These devices have gained immense popularity worldwide due to their multiple-functionality, and are a cult favorite amongst people who are aiming to adopt a healthier lifestyle. Overall it is estimated that the number of connected wearable devices, which has skyrocketed in the past 4-5 years will increase from 325 million (2016) to over 830 million in 2020.

Smartwatch Unit Sales

Figure: Smartwatch unit sales worldwide from 2014 to 2018 (in millions)

How does the insurance industry use data from wearables?

As more and more people opt for wearable technology, it has become an indispensable part of our daily lives. Due to the nature of such devices, they produce a huge amount of important data, which can grant valuable insights into consumer behavior and patterns. Insurance companies worldwide are using the data from such devices (upon customer approval) to perform strategic analysis of customer’s well being. They use the real time health data of customers from wearables along with macro data analysis sets to help customers identify risks and prevent their occurrence before hand. This data is also used by insurers to supplement various applications which provides them better claims analytics, underwriting analysis, enterprise decision management amongst several others.

In fact, several insurance companies have also formulated an active rewards based system to help encourage customers to adopt more healthy lifestyles. Such companies monetise physical activity, and customers are rewarded with quick benefits such as cinema tickets and additional free services. Insurance companies are able to track such activities through wearables and reward customers for the same, helping them stay fitter. Insurance companies also award customers with lower premiums if they are making continued efforts to adapt a healthier lifestyle, which can be automatically registered by their wearable devices.

A report produced by the Boston Consulting Group entitled “The Changing Face of Indian Insurance” states that insurance companies in conjunction with technological firms are constantly looking for ways in which data generated by such devices can be used to help build better risk models, create better and price efficient products and ultimately help to serve customers better, by meeting their personalised needs.

The Wearables Usage Cycle in the Life Insurance Business

Figure: The Wearables Usage Cycle in the Life Insurance Business (Source: Capgemini Financial Services Analysis 2015)

Wearables are changing the tedious nature of the insurance industry

Before the technological infusion in the insurance industry, the process of applying for insurance and deciding upon a premium was a painstaking task for both the insurer and the customer. Opting for a policy meant stifling through hours of paperwork not to mention numerous health check ups which customers had to undertake while the policy was being underwritten. Additionally, these tests were never redone, thereby, coming with the pre attached condition that a customer’s health will not change or improve during the entire duration of the policy period. However, with the advent of wearables, this has all changed dramatically. Not only do wearables help companies set realistic premiums for customers, but they also help update customer premiums according to real evidence from data tailored by the customer.  So truly, your morning runs, yoga classes, pilates breaks can all help you save your insurance premium by giving concrete evidence to your insurer about your commitment to a healthier lifestyle. Due to the real time information supplied by the devices, it also helps speed up the claims process, as customers can use this data to initiate the claims process.

Additionally, the devices also help improve the relationship between customers and insurance companies as they provide warnings to an insured when the wearable records a declining heart condition, such as a sudden decrease in blood sugar levels, or a sudden increase in heart rate. These features help customers develop increased trust with their insurers as it helps them understand that the company cares for them and their well being. In fact, several insurance companies are also using such devices to help provide additional services to the elderly, especially the ones who require special monitoring about certain health conditions.

Wearables have helped insurance industry connect with their customers in a way we never deemed possible.  Not only do they help insurers serve customers better and promote a futuristic outlook of the industry, but they also have the social impact of promoting a healthier and safer lifestyle, which benefits insurers and the customers alike. Certainly with the growing prominence of such devices, insurers will have to take additional measures to ensure data safety and security, but that is a small price to pay for the revolution these devices offer to bring into the health and insurance industry.

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