Wearable device and insurance – new business models: that’s the way they born

A killer app capable of attracting the adoption of wearable device is still missing, but for the insurance industry data collector wearable devices are already the most interesting hardware in recent years

26 Apr 2016

148mil of wearable devices will be sold in 2019. Such devices will be equipped with an internal microprocessor able to measure and record our activities: 148 million, with 70% of Smartwatches, and a 20% of Fitness Band and Activity Tracker.

One of the most interesting implications of this widespread technology is its link with the insurance industry. On the one hand many wearable brand are developing business models involving the corporate sector to achieve profit margins not only related to hardware selling. On the other the same insurance companies are going to focus on wearable to renew their offering and compete in the crowded market of  Health Insurance

Wearable, among companies and insurances

Nowadays most of devices needs a connection to smartphone or tablet to perform 90% of their functionality. Despite the trend represents a market expanding at a rate of 35% (CAGR), the effectiveness  perceived by users of wearable devices is still too weak. Consumers often struggle to feel and perceive the potential of such tiny tracker. Small size screen, short-term battery performance and the lack of a “killer app” able to drive the level of adoption, represent the main limiting factors for this industry. This is why, many of the leading brands are trying to make these devices more and more smart and accessible by any sort of end-user.

Next generation of wearable devices such as Fitbit or Jawbone Up is going to play an even more important role in the definition of health insurance premiums by setting partnerships with many companies through its corporate programs. BP America, for example, has reduced the cost of insurance coverage below the average increase of the United States by 6%. 14,000 employees, 6,000 spouses and 4,000 retirees have been gifted with a Fitbit: by tracing their activities it has been achieved the definition of a health care premium lower than the average recorded in previous years.

Fitbit is going to enter into partnership with Vitality, an insurance company (former PruHealth), that in the UK and US is offering a discount on health insurance in return for the use of the fitness tracker. The next big step in wearable monitoring will be the analysis of the data collected to produce meaningful feedback, as in this case, for companies and insurance industry.

Insurance company and tech insurance startup

The global market for Health Insurance is now worth $ 2.7 billion. In 2014, venture capital funds have financed tech insurance efforts with $ 700M; during just the first nine months of 2015, the funds have tripled. It is obvious that the market is not only large and expanding but is further packed and crowded with new tech-driven companies able to renovate the boundaries of this industry. Insurances are aware of it: investment in tech startups by insurance companies amounted to 43% compared to 2014, reaching 725% compared to 2013. Not only investments but also partnerships. A sound example is given by Axa which has entered into a partnership with Withings connected healthcare, offering free premiums and check-in for those customers who buy the policy and monitor their activities. To date, the partnership is in some cases an excellent marketing tool. In future the bar cuold be further raised, making the insurance premium flexible and customized.

The link between Wearable e insurance companies is not only a new business model for wearable devices, but rather an eccellent driver of innovation in insurance industry.

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