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Sleeping on the job has never been a fast track to success, but sleeping on the way to the job may lead to an early and unscheduled retirement.

Executive Summary

There’s no sound business reason why P/C insurers should cede all wellness opportunities to their life insurance counterparts, argues ISO’s Jim Weiss, providing information on studies that link auto and workplace accident rates to sleep patterns, stress and body mass, among other wellness indicators. Wearable technologies and gene sequencing are just two of the information sources that could unlock this sleeping giant for risk assessment, he writes, also noting the need to use wellness data responsibly.

More than 1 in 5 fatal car accidents in the United States involves a drowsy driver, according to a study last year by the AAA (American Automobile Association) Foundation for Traffic Safety. And yet sleeping patterns can be monitored at home with a variety of mobile apps and wearable technologies.

So why aren’t well-rested drivers sharing such information about their sleep patterns with insurers and potentially receiving discounts on their auto insurance?

One reason is that mobile tracking technology is still relatively new and unproven. Before offering any discounts, insurers would have to ascertain the accuracy and reliability of sleep-monitoring devices. They then would need to determine the duration and patterns of sleep that would significantly reduce the chances of an accident.

All this talk about sleep, though, raises some eye-opening questions. What other kinds of “wellness data” could property/casualty insurers use to help improve underwriting and marketing? And what steps would insurers take to make sure such data is used constructively and appropriately?

The answers may lie in an emerging field that’s rapidly gaining traction: the wellness industry.

A Sleeping Giant for Risk Assessment

Tired Businessman Driving A CarThe idea of offering incentives to policyholders to improve their wellness is hardly new. On the health insurance side, some health risk assessments (HRAs) presently offered to policyholders pose questions about driving habits, such as seatbelt usage and speeding, as well as a variety of other lifestyle choices, including meals, sleep, work and exercise. A policyholder’s health risks are certainly related to his or her time in an automobile and at work, but are auto, home and workers compensation risks as strongly related to decisions about wellness?

P/C insurers have long offered discounts to policyholders who attend defensive-driving courses or submit to telemetric examination of their driving habits with usage-based insurance (UBI) devices. Unfortunately, those approaches achieve only limited success because they focus on behaviors surrounding the insured asset rather than a policyholder’s larger decisions about wellness. A more effective approach might address how to minimize underlying risk factors that, when not properly accounted for, cause or contribute to P/C losses. In addition to the example of drowsy driving cited above, consider the following:

• According to a 2012 study by professors at University of California and West Virginia University published in the Emergency Medical Journal, Americans with a body mass index (BMI) over 35 are more than 50 percent more likely to be involved in fatal car accidents.

Reasons for this may vary from slower reaction times to improperly fitting seatbelts, and high BMIs may be connected to an increased risk of complications during post-accident medical treatment. While some UBI technology may aspire to teach policyholders to drive more carefully, such educational efforts may also be appropriately focused on teaching habits of exercise and nutrition that yield lifesaving benefits not limited to a policyholder’s time spent operating an automobile.

• The Health Enhancement Research Organization finds that workers reporting “high stress” have medical costs nearly 50 percent higher when compared with workers reporting lower levels of stress.

This may reflect how stress contributes to conditions such as high blood pressure, which may exacerbate injuries and complicate treatments, leading to higher casualty costs. It may also reflect how stress causes distraction or fatigue, which may in turn lead to more injurious workplace accidents.

Providing commercial policyholders with incentives to educate their employees on meditation and the importance of work breaks may reduce workers comp costs and improve policyholders’ business performance.

• An auto insurer in the United Kingdom found that refinements to eyesight testing requirements could save tens of millions of dollars in annual claims costs, but only a small portion of policyholders at greatest risk of vision problems submit to routine eye exams. (Press release: “Poor driver eyesight costs UK £33m a year,” Nov. 2, 2012; related study, “Fit to Drive Cost Benefit Analysis.”)

While some UBI technology and results may encourage certain policyholders not to drive during late-night hours, a wellness-based approach may indeed encourage routine eye exams. UBI could also be used to discount driving during daylight hours for policyholders with the poorest eyesight.

P/C insurers face numerous challenges in making use of wellness insights that include privacy concerns for policyholders and a lack of consistent, high-quality data from which to derive actuarially credible estimates. Yet many popular catalysts for enhanced prediction and action reside on the Internet of Things (IoT), the technological driver for what McKinsey & Co. has described as the “next trillion-dollar industry,” namely the consumer health industry. IoT technologies are the measurement tool of choice for the growing Quantified Self movement, which uses technology to help consumers amass statistics for all of their activities in order to encourage more data-driven lifestyle choices.

How P/C Insurers Might Use IoT Well

Insurers discouraged by recent Gallup findings that millennials are the least engaged of any generation presently buying insurance (in terms of identifying with individual insurer brands) may take heart in possibilities provided by IoT.

This very segment of prospective policyholders also largely comprises what has been called the “worried well” generation, in which people increasingly join in health and wellness activities for prevention or reassurance rather than waiting for treatment. (Press release: “Millennial Mindset: The Worried Well,” Oct. 20, 2014; related study of same name by Allidura Consumer, GSW and Harris Poll.)

This new mindset has given rise to the monitoring, measurement and intermediation of data that reflects exercise, eating, sleeping, mood, vital signs, cognition, work productivity and genetics. Nearly 70 million fitness tracking devices are expected to be shipped in 2015, according to the technology research firm Gartner, and over time it’s reasonable to assume that policyholders may expect more than just data in return for their investments in wearable technology. (Press release: “Gartner Says in 2015, 50 Percent of People Considering Buying a Smart Wristband Will Choose a Smartwatch Instead,” Nov. 18, 2014; related study, “Forecast: Wearable Electronic Devices for Fitness, Worldwide, 2014”).

P/C insurers are in a strong position to consider possibilities that might help deliver such a return and at the same time foster engagement with those policyholders.

The wellness revolution likely will carry on with or without P/C insurers, but the first movers in P/C that are able to execute a strategic vision are likely to realize powerful downstream benefits from empowering their policyholders.
Already, at least one P/C insurer offers group discounts to members of fitness centers with the ostensible aim of attracting personal lines policyholders motivated by wellness. Still more activity has occurred in the area of life insurance, where one insurer offers policyholders complimentary fitness trackers as well as rewards and discounts of up to 15 percent for adopting stronger exercise habits. (Press release: “John Hancock Introduces a Whole New Approach to Life Insurance in the U.S. That Rewards Customers for Healthy Living,” April 8, 2015.)

There’s no sound business reason why P/C insurers should cede all wellness opportunities to their life insurance counterparts when the latter focus on a single event—death—and P/C covers a spectrum of risks from policyholders’ day-to-day lives.

Promising sources of information abound in the growing wellness industry:

The wellness revolution will likely carry on with or without P/C insurers, but the first movers in P/C that are able to execute a strategic vision are likely to realize powerful downstream benefits from empowering their policyholders.

Using Wellness Data Responsibly

Book and Glasses. Vintage style

For More Information:

Readers seeking more information on the connections between wellness and property/casualty risks can find a complete list of the references cited in this article and additional sources of information here.

The National Association of Insurance Commissioners and others have rightfully expressed concern over how insurers interpret personal wellness information, particularly for biometric and genetic data, and its potential use in health insurance. The wellness strategies of P/C insurers are certainly not immune from such concerns and should likewise afford full consideration about how much data is collected, how it’s secured, and how it’s used in a voluntary and collaborative way with policyholders. But the appetite for wellness from both a consumer and public policy perspective has never been greater. The recently announced federal Precision Medicine Initiative (PMI) is premised on a data-driven approach to improving treatments that are based on a patient’s genes, environment and lifestyle.

The insurer that creates the right strategy for P/C could see the planning process as an important wellness exercise in its own right. This, incidentally, should occur regardless of the level and timing of investment in policyholder wellness initiatives. Insurers that exercise responsibility with the tools offered by the wellness industry will likely be in a position to create happier, healthier and more profitable books of business than their competitors.

Contributor

Jim Weiss, Verisk Analytics

Jim Weiss, FCAS, MAAA, CPCU, is director of analytic solutions at ISO Insurance Programs and Analytic Services. ISO is a Verisk Analytics business.