Technology has significantly shaped motor insurance premiums whereby motor insurers use telematics devices to monitor driver behavior. This trend has sparked debate regarding whether health insurance companies should do the same to policyholders through wearable tech. The viability of such a model is dependent on consumer market buy-in. It is worth noting that policyholders can grant an insurer permission to access their personal data if they find the rewards offered significantly attractive.
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Notably, the use of wearables in the health insurance realm is typically centered around three main objectives. Firstly, improve claims cost prediction whereby insurers can use data to supplement their underwriting process and pricing models. Secondly, make people healthier hence reduce healthcare cost claims. The use of wearable tech can help increase awareness regarding healthy lifestyle and promote increased physical activity, which in turn can improve policyholders’ health; thus, eventually, reduce the healthcare claims costs. Lastly, strengthen the competitive position of insurance companies. As wearable tech’s popularity increases, insurers may have to offer them as part of their regular wellness offerings to remain competitive.
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From the above-highlighted objectives, the consumer market may find wearables considerably attractive, mainly because they are geared towards improving their wellness. However, the aspect of using wearables to supplement pricing models is likely to make the consumer market reject the paradigm. The data collected may render policy plans potentially expensive for individuals classified as high risk to afford. However, considering that benefits/rewards associated with the use of wearable tech outweigh the perceived pitfalls, then insurance companies should be able to use wearables to collect relevant data from policyholders.
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