Recently, you’ve probably been hearing about the increased prominence of “wearable technology.” Wearables are defined as “accessories with embedded micro-sensors that can be worn or carried and are networked to provide continuous measurement and monitoring.”1 They can be worn under or on top of a person’s clothes, and can even be woven into fabrics.2
According to a PricewaterhouseCooper’s (PwC) report titled “The Wearable Future”, one in five Americans already use a wearable device, with rapid growth in the next several years anticipated. 2 The worldwide market for wearable technology is expected to reach $12.6 billion by 2018, and the insurance industry has already gotten on board.1
According to the Insurance Journal, “there are various areas of potential use for wearable devices including marketing, underwriting, risk management, new product development, workers’ compensation and personal auto injury claims management” within the insurance industry.2
Each year, Accenture releases their Technology Vision report in an attempt to track the emerging technologies that are most likely to shape the insurance industry in the immediate future. In their most recent edition, John Cusano, Senior Managing Director of Accenture’s Global Insurance Practice, wrote “emerging technologies such as wearables and other connected devices can help insurers break from their traditional business models and provide outcome-based services for their customers… one leading insurer recently announced that it will provide new policyholders with a free fitness band to track their health progress – and then reward their healthy living with a reduction in life insurance premiums.”3
Indeed, data gleaned from wearable devices could be used to set insurance prices and reward customers based on what the data shows regarding the wearer’s personal behavior and habits. Not only can health insurers use fitness bands such as the popular FitBit to monitor an individual’s vital signs and activity levels, but auto insurers could also adjust their rates based on the information provided from devices imbedded in the insured’s vehicle.4
Aside from fitness bands, other common wearable devices include smart watches and GoPro cameras. While Google Glass’ initial launch didn’t meet industry hype and expectations and never technically got out of the testing phase, experts believe that “smart glasses” are sure to make a comeback before too long. Additionally, while they’re not wearable, connected devices such as dashboard cameras and “telematics devices,” designed to record your driving habits are becoming increasingly common as well.
Accenture’s report found that 31 percent of insurers are already employing wearables to entice customers, partners, and even their own employees.3 More than half of the respondents to PwC’s survey indicated that they’d be “strongly motivated to use a wearable technology if it had a feature to monetarily reward them for using it frequently.”
Experts predict that in the next five to ten years, enough data will be generated by these devices to enable insurers to customize coverage options to individuals, providing tremendous benefits to both insurers and policyholders alike. However, this trove of data presents dramatically increased challenges from a legal, technological and privacy standpoint.1
Below, we explore some potential uses for wearable technology and connected devices, as well as the potential areas of concern.
Return to work and WC claims – According to Denise Garth of research firm SMA, wearable devices have the potential to lower claims costs. “It’s helping to restore people’s health in a faster way by being able to remotely, in a real time basis, monitor [injured workers] and get them back to work…and then also to be able to manage the overall risk of the individual,” said Garth.2 Jonathan Schwartz and Michael Hamilton of Goldberg Segalla LLP agree, pointing out that “wearables provide great benefits in terms of investigating and processing claims, such as where a claimant alleges that their physical activities have diminished since the incident that caused their injuries.”1 Wearable devices such as FitBits have the ability to constantly monitor and report on vital signs and levels of physical activity.
Safer inspections for adjusters, ability to train adjusters remotely – Schwartz and Hamilton say “wearables allow field adjusters or property risk engineers, when performing an inspection or appraisal, to take pictures and videos, document notes and access information in real time. This would make post-catastrophic event investigations safer, as adjusters could climb ladders, inspect roofs and handle machinery, all while remaining hands-free.”1 Additionally, wearable cameras could enable trainees to learn how to navigate potentially dangerous accident or disaster scenes from the safety of a remote location by monitoring the live recordings of experienced adjusters. 2
Premium discounts – Life and health insurance providers can easily take data from fitness and activity trackers to adjust rates based on a person’s lifestyle habits, and auto insurers can monitor the driving habits of their policy holders to reward safe driving habits.1
Removes doubt – When there’s an auto accident, adjusters typically have to rely on information gathered after the collision has occurred, which is usually provided by statements from the involved parties. Technologies like smart eyewear or dashboard cameras could soon become the norm for all professional drivers, providing access to real-time information and unbiased views of what exactly led to the accident.1
Increased workplace productivity – Risk and Insurance magazine points out that just 30 years ago, computers weren’t automatically at every desk in an office, but now they’re a ubiquitous and necessary part of the vast majority of jobs. Michele Lange, director of legal technologies for Kroll Ontrack, says that wearables will soon be viewed the same way. “Whenever technology can offer a business a more efficient employee base and cost-savings due to increased productivity, it will catch on. It’ll be no different for wearables,” she said.5 When paired with smartphones, wearables like smart glasses have the ability to dictate text, translate foreign languages, and display information in real-time in front of the wearer, so it’s not hard to imagine such devices improving productivity.
Negatives and Potential Drawbacks
Data breaches – Security breaches should already be a concern for any entity that stores files containing personal information. Data from wearables could be particularly sensitive. Calling it a “privacy law minefield,” Lange says that data from wearables touches “everything from the Privacy Act of 1974 to potentially even HIPAA.”5
Privacy concerns and protection of intellectual property (IP) and trade secrets – One of the main areas of concern over Google Glass involved privacy, and many businesses banned the use of Google Glass within their establishments. Additionally, as wearable technology with the ability to discreetly take photos or record video becomes more common, protecting IP and trade secrets will become more difficult for employers and copyright holders.5 While smartphones also have these capabilities, the concern with smart eyewear in particular is that the user can record anything with a simple voice command, making it far less obvious when something is being recorded.
Need for more sophisticated data management – According to Schwartz and Hamilton, wearables “pose serious privacy concerns as they increase dramatically the amount of personal data to be collected and stored. This could easily magnify the impact of data breaches.” With such large troves of personal information being generated, insurers must have the ability to securely store and manage this data. Schwartz and Hamilton see the need for insurers to partner with “digital and cloud technology companies, in order to better integrate their IT functions into their underwriting and claims processes” as they begin to utilize wearable tech data.1
Increased rates – Just as rates could potentially be lowered to reward good behavior and habits, information could just as easily be used to punitively increase rates for those deemed to be riskier to insure.
Adverse health effects – Insurance Journal points out that “workers using wearable technologies in the workplace could experience headaches, double vision and dizziness, according to Dr. Nabeel of Mt. Sinai.” Wearables could also cause more accidents while driving or simply maneuvering throughout the workplace if workers become distracted by their devices.5 There is also the possibility that wearers could have an adverse reaction to the materials that the device is made of, potentially exposing manufacturers to liability issues.
If your district is considering the use of wearable technology for your employees, we recommend that you consult with appropriate legal counsel and then develop a clear, comprehensive policy in conjunction with your HR department outlining their use. It is important for employees and district management to understand the potential implications of such technologies and the inherent risks of not only wearing the devices, but also the potential risks posed by data that they generate.
1 http://www.goldbergsegalla.com/sites/default/files/uploads/JLS-MAH_ICMIFVoice_Sept2015.pdf
2 http://www.insurancejournal.com/news/national/2015/05/06/367014.htm
