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
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.”