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Life Insurers Must Prepare Now for the Internet of Things

The Internet of Things provides a wealth of new data, and an extraordinary set of opportunities and challenges. Life insurance CIOs need to create an infrastructure that makes it possible to leverage this new data in existing underwriting and to support continuous underwriting.

Key Challenges

  • Life insurers will need to develop an effective strategy to take advantage of the underwriting data increasingly being generated by the Internet of Things. The opportunities are poorly understood, and life insurers are ill-equipped to address the profound changes it will bring.
  • Life insurers are ill-equipped to handle the increasingly detailed information delivered by Internet-connected devices, which will affect life insurers in two critical ways — by delivering new data that will enable them to assess risk more accurately, and by helping their customers potentially lengthen their lives.
  • Life insurers are not yet able to evaluate "Internet of Things" data to appraise the potential value it can deliver. For example, it is uncertain whether measuring fitness performance, driving Internet-connected cars, or monitoring disease care will yield significant improvements to mortality rates.

Recommendations

Life insurance CIOs:

  • Prepare the IT infrastructure to collect, manage and benefit from the data delivered by the Internet of Things, particularly new data products from existing data providers as they become available.
  • Lead a strength, weakness, opportunity and threat (SWOT) analysis with product development and underwriting regarding the Internet of Things for your organization, for both new and existing products and underwriting approaches.
  • Use the Internet of Things to help drive innovation related to new product types, strategic use of data and fostering healthier living.

Introduction

Gartner defines the "Internet of Things" as a network of physical items with sensors that connect autonomously to the Internet, to people and to one another. Use of these sensor-enabled connections is rapidly growing in many industries, and these connections are being used increasingly by many mobile apps. One of the most common examples is the automotive industry. Vehicles are increasingly connected to the Internet with telematics sensors (for example, to deliver data on truck drivers' on-road behavior to fleet managers), and some auto insurers are also offering discounts to drivers willing to install monitoring devices in their personal cars.

Gartner believes the Internet of Things will ultimately deliver significant changes for global life insurers, as it already has in many other industry verticals. However, it will likely not have a significant impact on the industry for at least four years. The longer timeline is due, in part, to the current inactivity by life insurers to change their underwriting practices, the lack of attention given to the Internet of Things by insurance-focused vendors, and the current lack of obvious connections between the Internet of Things and life insurers. Despite this time lag, life insurance CIOs worldwide should begin preparing now for the changes the Internet of Things will bring. The first life insurers who will likely take advantage of the Internet of Things are product and underwriting innovators.

Gartner expects that health and activity data produced by the Internet of Things from wearable sensors and automobile sensors will be delivered by existing underwriting evidence providers. Similar to the way most North American life insurers are now using pharmaceutical data, with little impact to disclosure, storage, compliance or process, existing vendors will begin to offer data products containing data from the Internet of Things. While efforts are not yet underway by medical records collection vendors, laboratories, inspection companies, and data aggregators, they will, over the next several years, find and assemble this data into products that life insurers can use as part of their underwriting practices. Existing customer disclosures and signatures will need to be expanded somewhat, but will likely cover the addition of the Internet of Things content without significant regulatory intervention, as the vast majority of new Internet of Things data expands the existing medical and activity data already available. To successfully use the Internet of Things data, life insurers will need to expand their current underwriting and new business systems to accommodate these new data sources.

This said, there is little data analysis to establish that new data from the Internet of Things will actually improve mortality. Although wearable devices promise additional data feedback to wearers to track fitness goals, or better manage disease, there is still much that needs to be worked out to: (1) identify consumers that will use these devices consistently; and (2) access this data for underwriting or customer service. An overview of some of the relevant sensor-enabled products that are already commercially available shows the possibilities that the Internet of Things represents for life insurers, their CIOs and their IT organizations. This description should not be viewed as an endorsement of these vendors, but simply a sample of the hundreds of devices that are becoming available. The vendors listed are simply a starting point for life insurance CIOs to begin to understand some of the technology developments in the Internet of Things that could impact them. Sample categories and vendors include:

  • Disease-monitoring and management devices. Devices that collect information on heart performance, brain activity, blood sugar, level of physical activity and other critical metrics, over time, can reduce the impacts of certain diseases and help individuals with chronic illnesses to better manage their conditions. This data, when used with techniques (such as gamification) that encourage the individual's involvement, may help motivate individuals to care for themselves better, and this might increase their longevity. These devices are still quite new and have not proven their ability improve longevity. They must still demonstrate to consumers and medical providers that they can improve disease outcomes. Many devices, such as glucose meters, produce large amounts of data that may improve health, but medical delivery systems are not yet equipped to handle vast amounts of data and identify danger signs for patients. Examples of providers of these disease-monitoring and management devices include:
    • BodyTel provides a blood glucose meter, blood pressure meter and scales that alert a physician of outlying results.
    • Imec has developed a prototype for an electrocardiogram patch to monitor heart rates and an electroencephalogram headset to measure brain activity.
    • Moticon produces insoles for shoes that measure balance and activity level, particularly for rehabilitation purposes.
    • Preventice offers a wearable device to monitor heart activity, delivering data to the individual's physician for review.
    • Zoll Medical produces the LifeVest product, which is used after a heart attack, before and after bypass surgery, after stent replacement, and for cardiomyopathy and congestive heart failure. It's used to monitor cardiovascular function and provides a wearable defibrillator as well.
    • Proteus Digital Health provides ingestible and wearable sensors that gather information regarding medication-taking, activity patterns and rest patterns.
  • Fitness-monitoring devices. A wide range of these devices — primarily marketed to healthy individuals who want more biofeedback to help them stay healthy — is inundating the consumer market. The impact on life insurers is likely to be small, but there may be some benefits, in terms of fewer or delayed death claims due to increased longevity. Some examples (by no means comprehensive) of these devices include:
    • Basis offers a wristband that contains multiple sensors, monitoring blood flow, movement, skin temperature and galvanic skin response (to measure perspiration).
    • BodyMedia has a wristband to help users manage calorie intake, activity and sleep.
    • Fitbit provides wearable products to help manage, weight, diet, activity and sleep.
    • Jawbone provides a bracelet to track daily activity and sleep.
    • Nike FuelBand measures heart rate and calorie consumption.
    • Zamzee provides kids with a way to monitor activity level and receive rewards through a gamified experience.
  • Wearable diagnostic equipment. These devices, which can collect breathing, sleep, bodily performance and other data, can help physicians diagnose medical conditions faster and treat them earlier. They also have a positive effect on mortality results, reducing death claims. That said, the healthcare delivery system is in very early stages, and many of these devices still need to be improved and proven over time. Providers include:
    • First Warning Systems has developed a breast-cancer-detecting bra.
    • Avery Dennison's Metria Wearable Sensor Technology offers devices that can detect heart irregularities.
  • Automobile networks. The rise of connected automobiles will help to improve driver safety over the next several years. Sensors in the cars themselves and in the surrounding environment will help to warn drivers of hazards, detect unsafe driving, improve traffic flow and alert emergency personnel more quickly. The combination of these improvements will help reduce traffic accident fatalities, which is a leading cause of death worldwide, particularly among individuals with life insurance.

Insurers must begin to consider how they can prepare their business partners and direct their internal project leaders for the coming changes brought about by the Internet of Things. They should anticipate that the data gathered from the Internet of Things will impact them in two ways: (1) new data from health-monitoring devices will deliver new underwriting data, such as pulse, blood pressure and level of activity, for the initial underwriting decision; and (2) network improvements, health monitoring and diagnosis equipment could have a positive impact on longevity, reducing overall life claims.

Analysis

Prepare the IT Infrastructure to Collect, Manage and Benefit From the Data Delivered by the Internet of Things

If adopted by consumers, the Internet of Things will inevitably deliver vastly more data (from many more sources and in many different forms — much of it in real or near-real time) than insurers' IT organizations are accustomed to managing. To effectively use this data for underwriting, which will likely be its most common use, global life insurers will need to deploy a technology infrastructure that can manage larger volumes of data, rapidly changing data, and data that creates a historical view of an insured individual. Data from the Internet of Things will require life insurers to develop new underwriting models, evaluate the effectiveness of current underwriting sources, and continue to test the relationships between underwriting data and claims. The use of streams of data in underwriting, unlike today's life insurance underwriting, which is a typically a "snapshot" approach, will help life insurers innovate, improve underwriting risk assessment and become more competitive. For example, driving data could be used to identify typical driving and risk patterns (although some obstacles, such as determining that the insured individual is in fact the driver of the vehicle, will need to be overcome).

Recommendations

Life insurance CIOs should prepare for the Internet of Things by delivering technologies that:

  • Support a flow of data rather than a single data point. To gather and store data from the Internet of Things, insurers must be able to accommodate data that changes over time. This will be particularly true for driving data, health data, and other insured data that can be used in underwriting and creating an insured's data profile. Life insurers will need to accommodate larger volumes of data, more rapidly changing data and new data sources to do this successfully.
  • Enable extensive data integration through the use of middleware technologies. These technologies will help to collect, organize and deliver data to the appropriate systems in a standardized way.
  • Connect and leverage the value of electronic health records. The proliferation of electronic health records and different medical delivery model data, and the eventual inclusion of medical device data into the electronic health records for disease management, will introduce new opportunities for more underwriting data probably delivered through existing underwriting data vendors.
  • Combine the Internet of Things data with other data. Life insurers must create a data infrastructure that can integrate data from the Internet of Things with other data sources, such as social media, mobile devices and publicly available data. These data stores must accommodate larger volumes of underwriting data, more rapidly changing data and new data sources, as well as track data changes over time.
  • Deploy an underwriting data infrastructure that can track and maintain underwriting data from insured customers to create the ability for continuous underwriting (either manually or using electronic underwriting solutions) if product developers agree to build these products.
  • Accept and leverage new data products from existing vendors as they become available.

Use the Innovations Enabled by the Internet of Things to Deliver Continuous Underwriting

Life insurance CIOs continue to ask Gartner how they can anticipate the needs of their business counterparts in underwriting, customer service and product development, and present business opportunities, enabled by emerging technologies. Although Gartner has not identified any life insurers actively pursuing continuous underwriting as a new underwriting approach, the Internet of Things can enable insurers to move from one-time underwriting to the principle of ongoing underwriting. Ongoing underwriting is an underwriting approach that could be applied to specially designed products, whereby underwriting departments continue to receive and review underwriting data after the initial underwriting period.

Continuous underwriting would demand that life insurers perform continuous underwriting checks using data over a period of time. The Internet of Things could provide this stream of data with the collection of ongoing disease management, health monitoring, location and driving-pattern data. The stream of data could establish behavioral patterns over time and give life insurance underwriters the ability to review this content and re-underwrite policies every couple of years using low-cost and easily accessible data. This would occur on new specially designed life insurance products that fit into the regulatory and legal framework and create a low-cost, continuous underwriting model that leverages the data provided by the Internet of Things and other data-based evidence sources.

Global life insurers will need to consider the legal and regulatory impacts that continuous underwriting would have on their organization. For example, continuous underwriting would create another two-year contestability period in the U.S. market.

Recommendations

Life insurance CIOs should:

  • Discuss with business counterparts plans for data use in underwriting and how new data sources provided by the Internet of Things will drive underwriting profitability.
  • Lead a SWOT analysis with product development and underwriting regarding the Internet of Things for your organization for both new and existing products and underwriting approaches.
  • Assess existing systems to determine the impact that ongoing underwriting would have on existing new business, electronic underwriting and actuarial systems.

Source: Gartner Research, G00248914; J. Greene, J. Brooks; 20 Aug 2013