North American life insurance provider John Hancock is to link life insurance policies to holders’ fitness trackers, in what it claims is a drive to incentivise longer, healthier lives.
But privacy and transparency questions remain.
Supporting this convergence of behavioural economics and consumer technology is Vitality, the popular behaviour-change platform that rewards customers for living healthier lives. Vitality is known to offer Apple Watch and Fitbit devices to reward the active lifestyles of its customers.
“For centuries, the insurance model has primarily provided financial protection for families after death, without enhancing the very quality it hinges on: life,” said Marianne Harrison, president and CEO of John Hancock Financial Services, in response to the announcement.
We fundamentally believe life insurers should care about how long and well their customers live. With this decision, we are proud to become the only US life insurance company to fully embrace behavioural-based wellness and leave the old way of doing business behind.
Fitness tracking & life insurance
John Hancock began offering Vitality in 2015, in what it says was a response to a troubling shift in Americans’ health. Lifestyle diseases are believed to be the leading cause of death in the country.
For example, on 21 September, the World Health Organisation published figures revealing that alcohol is the cause of five percent of deaths worldwide – roughly three million a year – and 13.5 percent of deaths among people in their 20s. The problem is most acute in deprived areas, it said.
According to the Oxford Health Alliance, just four choices — physical inactivity, an unhealthy diet, excessive alcohol, and smoking — now cause more than 60 percent of all deaths and 80 percent of the disease burden globally.
In the face of these figures, Vitality claims its policyholders have been shown to live 13 to 21 years longer than the rest of the insured population, and to generate 30 percent lower hospitalisation costs.
John Hancock says its Vitality policyholders take nearly twice as many steps as the average American, and have logged more than three million healthy activities, including walking, swimming, and biking.
The insurer also benefits from more engagement with its customers, who, it says, engage with the programme approximately 576 times per year – compared to customers with traditional insurance, who engage with their life insurance company just one or two times a year on average.
Given the results it’s seen, the insurer is now rolling out the Vitality model across all of its life insurance products.
Commenting on the move, Brooks Tingle, president and CEO of the John Hancock Insurance division, said: “The remarkable results of our Vitality offering convinced us this is the only path forward for the industry. We have smartphones, smart cars, and smart homes. It’s time for smart life insurance that meets the changing needs of consumers.”
We believe offering Vitality on all life insurance policies, at no additional cost, is the right thing to do for our customers, our business and society. We believe this is the future of our industry, and I encourage other insurance companies to follow suit.
Internet of Business says
The move goes right to the heart of the conundrum in the insurance sector: namely who benefits from it. John Hancock’s move raises ethical questions around privacy and equality in leaving the traditional life insurance model behind and exclusively offering Vitality-based products.
As keen as the insurer is to present this absolute approach to connected insurance as a drive to improve the health of Americans – which in itself is a worthy, humanitarian aim – there’s no doubt that it also stands to benefit from more individual risk modelling and attracting healthy customers.
On one level, it’s a more accurate and personal approach to life insurance, and some customers will value the added incentives to live a healthy lifestyle, as well as the reduced insurance premiums that come with it.
Yet, these products may leave others uncomfortable with the prospect of having their insurer strapped to their wrist, in effect, measuring their every step and heartbeat – and, conceivably, punishing them for not meeting the required standards.
If this were to become an industry norm, the practice could represent an uncomfortable violation of privacy and serve to create even greater division in the US, where access to healthcare is largely reserved for those with deep pockets or good insurance policies.
If you happen to be genetically predisposed to certain conditions – if your heartbeat shows signs that you are vulnerable to heart disease, for example – you may see your insurance premiums go up. As the WHO figures referred to above reveal, some health problems are worse in deprived areas and among people on low incomes.
There is a cultural element at play, too. The US insurance-based health service operates on a very different set of principles to the UK’s National Health Service, for example, which is focused on equal treatment for all citizens, funded by the state from taxes. Under the British system, theoretically, no one is punished for being sick, whatever their economic status.
Where insurance has, traditionally, often pooled risk, Internet of Things devices are now enabling providers to take a more case-by-case approach – such as RSA’s use of smart home technology and pet tracking. In the case of John Hancock, such technology benefits the active but, by implication, punishes the less active – regardless of whether that’s due to their lifestyle choices or unalterable genetic and environmental factors.
The Vitality and John Hancock figures above, boasting the activity levels of its members, may also be confusing correlation with causation, and/or exhibiting confirmation bias.
Many of its customers may be Vitality users because they are active, not active because they are Vitality users. Such insurance products will attract those already living healthy lifestyles in the hope of reduced insurance premiums – in much the same way as sensible young drivers often turn to telematics devices.
Then there’s the issue of how insurance providers can tell who’s wearing the device. Could customers get away with having an athletic friend wear their fitness tracker, for example, or even attach it to their dog?
Some may also question the ethics of any notional insurance company, at some point in the future, investing in a fitness technology company, or forming alliances with one in order for both to sell each other’s products.
In that hypothetical scenario, the insurer could reap the financial reward of forcing people to invest in a given fitness tracker, let’s say, as well as from the reduced likelihood of payout. That would need to be set against the obvious benefits of a more healthy population.
But in a state-funded health service, for example, who would complain if costs to the public purse were reduced by more and more people living healthy lifestyles?
It’s early days for fitness tracker-linked insurance, and while the benefits on both sides are clear to see, there are ethical, privacy, and equality concerns that both regulators and insurers need to address.
Update: John Hancock has contacted Internet of Business, and other publications, to clarify that, while all customers will be required to enrol in the Vitality program, the use of fitness tackers as part of their policy will be opt-in.