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Ian McKenna: Wearable tech will change protection forever

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Watch 2.0 is, among other things, the most powerful healthcare device ever known.  It could do to the insurance industry what the iPod did to music. 

Until last week, wristwatches were often seen as a symbol of success; discreet jewellery that could identify financial achievers in life, usually without being too flashy.

Last week, Samsung, LG, Motorola and the mighty Apple changed all that forever. Within five years, watches will become the device that can tell wearers how long they will live and what they will die from. Have you ever heard a better protection selling opportunity?

If you do not believe me, remember the iPhone is only seven years old but accounts for 55 per cent of the income of the largest company in the world. Which company has built the next release of its mobile operating system primarily around healthcare biometrics? This will enable a vast array of mobile apps that can be used to measure a wide range of biometric data and provide it in real time to consumers, medical professionals and insurers.

This will make possible highly personalised protection products able to offer consumers significant variations in cover, benefits and premiums depending on whether they attain personal health objectives. In future, consumers will be able to agree personal health goals with an insurer and use the device to send data to confirm if they have achieved the goals on a daily basis. Imagine PruProtect’s Vitality product on steroids or, perhaps more accurately, on acid. Truly personalised cover designed to meet customers’ individual circumstances.

Some insurers dismiss this potential source of data, questioning how certain they could be that the information submitted was actually coming from the insured person. In practice, a wide range of biometric identification and security mechanisms are now available which can identify individuals to a degree of accuracy inconceivable just a few years ago. 

While some may expect resistance to providing medical information in this way, several consumer research studies have suggested the opposite because of the enormous benefits such services can offer.  Biometric data will not reinvent the protection market this year or even next but in five years’ time it is reasonable to expect dramatic change.

Advisers with no plans to be practising in five years’ time and who are happy to retire without achieving any sale value for their business need not worry about the impact of these changes. For everyone else, it is important to start considering now how you will adapt your proposition to a world where consumers have all their medical details at their fingertips and are vastly more informed about their future health. The marketing of life products could change rapidly as consumers become far more aware of their mortality and morbidity.

And do not assume protection will be the only market affected. There are no prizes for guessing the first adviser technology supplier to get a smart watch app into the market. True Potential’s ImpulseSave app is a great example of how financial services can integrate with smart watches. Designed to enable consumers to make small savings contributions – from amounts as low as £10 – quickly and easily with a few taps on a screen, the app can make impulse (or perhaps guilt) -driven saving as easy as impulse spending.

This demonstrates that wearables, along with digital wallets which allow people to pay via their device, will become part of everyday life in the next few years. The trend presents an opportunity to build vastly different relationships with consumers, including many millions of mildly affluent customers who have become disenfranchised by traditional advice.

Wearable devices and the related biometric software have the capacity to transform almost every element of the life and medical insurance market. Quotations, applications, underwriting, service and, for health policies, even claims processes can be radically reinvented. 

In a few weeks’ time I am due to attend a US conference dedicated to wearable devices in employee benefits. I am stunned a whole conference can already be built on the subject but it shows the scale of change coming over the horizon. 

Ian McKenna is managing director of Finance & Technology Research Centre 

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