Wearable Computers Are The Greatest Innovation Of Science
RPC Business Blog - The Rise of Wearable Tech and the Implications on the Insurance Industry - Charlie Parker - July 2015
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Charlie Parker
Summer Scheme Student
14 July 2015
RPC Business Blog
The Rise of Wearable Technology and the Implications
for the Insurance Industry
The popularity of wearable technology is on the rise and the insurance industry
needs to evolve to keep up the pace.
Wearable technology covers any kind of electronic technology or computer that
is incorporated into clothing or accessories. Wearable tech most commonly takes the
form of a smartwatch or a fitness tracker worn around the wrist. Leading household
brands with loyal customer bases, such as Google, Apple and Fitbit are strong
players in the wearable tech market, naturalising wearables as commonplace in our
everyday lives.
Apple reports only moderate sales of its ambitious Apple Watch to early
adopters, but sales of the simpler and less expensive fitness trackers of Fitbit have
soared from around 4 million devices sold in 2013 to over 10 million in 2014.1
Even
so, analysts at Morgan Stanley predict that the Apple Watch will soon become a
strong contender to the Fitbit.2
Analysts from Stifel believe that ‘breakout demand for
wearable health and fitness devices is being driven by the growing concern for
health and fitness, improvements in kinetic and biometric tracking technologies, ease
of connectivity, and the proliferation of apps and popularization of social fitness.’ 3
However, the rise in popularity of wearable tech could pose a risk to insurers.
Inga Beale, Chief Executive of Lloyds of London, warns that ‘insurers are in danger
of being “Uber-ised”’ as tech companies that track exercise habits through wearable
1
http://www.ft.com/cms/s/3/2be8b41a-f50f-11e4-abb5-00144feab7de.html#axzz3ftlP4hOH
2
http://www.ft.com/fastft/359261
3
Ibid
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devices hold vast quantities of data on their products’ users, which could be used to
usurp insurance companies.4
For instance, the data collected through a Fitbit on a
user’s activity levels can help make a better assessment of their general health. This
leads to a better analysis of whether that user will make a claim against their health
insurance policy. The more data available, the less of a risk borne by the insurer.
Insurers need to make sure they are at the top of their game in understanding how
wearable technology can help them to minimise risk and set competitive premiums.
Car insurance companies are already using tracking devices to make more
accurate assessments of risk when insuring drivers, based on their style and
frequency of driving. Dash cams are an increasingly popular way of proving which
party is at fault in road traffic accidents too. Dash cams are small, dashboard
mounted cameras, costing from as little as £50, recording footage from the
windscreen of a vehicle. 29 British car insurers have confirmed they would accept
dash cam evidence in the event of a claim.5
Wearable tech such as Google Glass,
which has an in-built camera, can not only replicate the function of a dash cam, but
is more portable and instantly available since it is already attached to the user.
Where dash cams only provide footage of the view from the windscreen, Google
Glass can track the driver's gaze and provide better information on whether they
checked their mirror for a passing motorcyclist before turning right into the junction
and causing an accident. More certainty of who is at fault in the event of a claim
saves insurers time and money in terms of the investigative work that is already
being done for them by the wearable tech.
Google Glass may also provide opportunities for more certainty in claims in
other areas of insurance. For example, some police forces have adopted the use of
body cameras. A study by Rialto found that police officers who wore body cameras
were half as likely to use force than those who did not.6
This use of this wearable
tech seems to make officers consider their actions more carefully, reducing the risk
of an action against the police by a member of the public who feels they have been
treated unfairly. In turn, this saves insurers who indemnify the police from having to
4
http://www.ft.com/cms/s/0/96ee802c-1e41-11e5-aa5a-398b2169cf79.html#axzz3ftlP4hOH
5
http://www.telegraph.co.uk/finance/personalfinance/insurance/motorinsurance/11590039/Dashboard-
camera-sales-rocket-as-insurers-accept-footage-as-evidence.html
6
http://rt.com/usa/217483-police-body-cameras-study/
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pay out on a claim against their professional indemnity policy. Police forces may be
lured towards Google Glass and away from body cameras due to the other functions
available, such as facial recognition.
Finally, wearable tech poses implications for data protection and intellectual
property. Zurich, an insurer, warns that the rise in wearable technology increases the
potential for personal and professional data being leaked.7
Wearable tech could
violate workplace intellectual property policies by capturing images of confidential
data and potentially sending that data outside of the workplace, leading to claims
from employers who have had to pay damages or compensate clients for data
breaches.
The rise of wearable technology brings both challenges and opportunities to the
insurance industry. It is now up to insurers to make sure they embrace the
opportunities and stay ahead of their game.
7
http://insider.zurich.co.uk/industry-talking-point/top-3-insurance-risks-wearable-technology/