The health insurance pit­falls of us­ing a fit­bit

Shar­ing health data from a smart­watch could un­wit­tingly in­crease the cost of insurance in fu­ture, warns Adam Wil­liams

The Sunday Telegraph - Money & Business - - Front page -

There has been a boom in wear­able fit­ness-track­ing tech­nol­ogy in re­cent years, but peo­ple who share health data with their in­surer have been warned that they could price them­selves out of cover in fu­ture. Sales of de­vices such as the Fit­bit, Ap­ple Watch and Sam­sung Galaxy Gear are ex­pected to hit 2.6mil­lion in Bri­tain in 2018, ac­cord­ing to CCS In­sight, a tech­nol­ogy an­a­lyst.

The in­for­ma­tion gath­ered by these de­vices is al­ready be­ing used by some in­sur­ers to cal­cu­late pre­mi­ums and there are fears that the mar­ket will be­come “self-se­lect­ing”, with only the health­i­est cus­tomers en­joy­ing lower pre­mi­ums.

Cus­tomers could un­wit­tingly re­veal in­for­ma­tion about them­selves that in­sur­ers would not other­wise know, and this could re­sult in much higher charges for health insurance cover.

Philippa Kelly, of the In­sti­tute of Char­tered Ac­coun­tants in Eng­land and Wales, warned: “Fair doesn’t nec­es­sar­ily mean cheap. In­sur­ers will be able to write poli­cies more ef­fec­tively in fu­ture and we will see costs go up for some peo­ple and down for oth­ers. But we don’t want a si­t­u­a­tion where peo­ple are un­fairly ex­cluded from cover by things they can’t con­trol.”

A study of the insurance mar­ket by the Swiss Re In­sti­tute, a re­search or­gan­i­sa­tion, last year found that in­sur­ers had filed hun­dreds of patent applications re­lat­ing to “pre­dic­tive insurance mod­el­ling” and other tech­nol­ogy-led ad­vances in the past five years as they looked to gather more in­for­ma­tion about their cus­tomers.

How­ever, pol­i­cy­hold­ers who hand over their data with­out con­sid­er­ing the con­se­quences could ul­ti­mately un­der­mine hard-won agree­ments be­tween the Gov­ern­ment and the insurance in­dus­try.

Rules are in place to en­sure that in­sur­ers are not able to use in­for­ma­tion de­rived from some health tests to in­crease cus­tomers’ pre­mi­ums.

One agree­ment, which is ex­pected to be re­newed later this year, en­sures that peo­ple are not de­nied cover be­cause they have a pre­dis­po­si­tion to a cer­tain ill­ness. While smart­watches do not cur­rently col­lect this depth of data, in­sur­ers do an­a­lyse other in­for­ma­tion you choose to share with them.

Fit­bit said it shared data only with third par­ties cho­sen by the user, but this in­cludes ex­er­cise data, calo­ries burned, heart rate and sleep pat­terns, and the list is ex­pected to grow.

Emma Bell, an insurance bro­ker at SPF Pri­vate Clients, a mort­gage firm, said: “There will al­ways be a need for insurance, but the way in which it is sold and ad­vised will change, with a move away from a prod­uct-based of­fer­ing to pricing risk based on the in­di­vid­u­als and their life­style.”

Richard Keat­ing, an ac­tu­ary for PWC, the ac­coun­tancy firm, said us­ing tech­nol­ogy could de­stroy the “pool­ing of risk” that un­der­pins the en­tire insurance in­dus­try. This is be­cause in­di­vid­u­als who rarely claimed would no longer be cross­sub­si­dis­ing the pre­mi­ums of riskier cus­tomers, who would face much higher costs.

Royal London, the in­surer, said this was a grow­ing prob­lem faced by the in­dus­try. For ex­am­ple, car in­sur­ers now of­fer “black box” telem­at­ics de­vices that track driv­ers. While the tech­nol­ogy has re­duced pre­mi­ums for some mo­torists, oth­ers have fallen through the cracks.

The Fi­nan­cial Om­buds­man Ser­vice has high­lighted this as a grow­ing prob­lem and cited the case of “Ash”, whose in­surer threat­ened to can­cel his pol­icy be­cause he was driv­ing too of­ten at night.

Ash worked night shifts and was forced to can­cel the pol­icy, which in­volved pay­ing a penalty and los­ing the sum he had paid for the black box. The om­buds­man said the in­surer, which was not named, hadn’t given Ash enough in­for­ma­tion to make an in­formed de­ci­sion.

At present only one ma­jor health in­surer, Vi­tal­ity, in­te­grates be­havioural track­ing into its pricing pol­icy. Dave Pri­est­ley, of Vi­tal­ity, said us­ing ac­tiv­ity data to of­fer re­wards and re­duce pre­mi­ums was fairer than of­fer­ing a no-claims dis­count, as most ri­val in­sur­ers did.

“We are try­ing to give the mem­bers con­trol over their re­newal in­crease,” he said. “It is good for us and it is good for you.”

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