What You Wear Could Affect Your Life Insurance Premiums

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Earlier this year, John Hancock Financial, an American subsidiary of the Canadian insurance company Manulife Financial, made headlines in the life insurance industry when it started to hand out a Fitbit to its new life insurance policyholders.

A Fitbit is an electronic wristband that can track the wearer’s daily physical activity. This includes being able to sense how many steps a wearer takes, the number of calories burned, floors climbed, heart rate levels and the intensity/duration of any other physical activity the wearer performs.

Normally, the data from Fitbits is used by people to monitor how much exercise they perform daily and the data from a Fitbit is kept confidential and sent directly to the owner of the Fitbit.

John Hancock Financial, however, is using the Fitbit quite differently.

All of the Fitbit devices the company hands out to its policyholders transmit data about those policyholders’ physical activities directly to the company itself. With this data, John Hancock Financial has created a tracking system focused on something that it calls “vitality points”. Policyholders who have a very healthy lifestyle and exercise regularly can earn vitality points.

These points can then be redeemed into travel, shopping and entertainment-related rewards. The company has also promised that the policyholders with a very healthy lifestyle could receive a discount of up to 15% off their annual premiums.

At first glance, all of this seems like a great idea. The people who exercise daily and are healthy are expected to live longer because they continue to pay premiums and don’t require an early policy payout. These people are often a life insurance company’s best customers, so, they should be rewarded by getting discounted premiums right?

Unfortunately, discounted premiums idea healthy people and the use of the Fitbit technology could also have several negative impacts.

Firstly, if healthy and physically active people get discounted life insurance policies, where will the life insurance companies find the money to cover that resulting financial loss? The easy answer to that question is that people with regular or poor health will likely end up paying higher premiums so their life insurance company can balance out its books and keep its profit margins up.

This could marginalize an entire group of people simply because of their weight or their inability to perform physical activities. John Hancock Financial has said they will charge lower premiums to policyholders who opt in to the company’s vitality points program. This means that policyholders who are unable to opt in to the program have to pay more for the exact same insurance products.

Incorporating Fitbit technology into the life insurance industry could also end up slowing the underwriting process down for customers looking to purchase a life insurance policy quickly. Instead of being evaluated based on their existing medical records, customers would likely have to undergo a lengthy evaluation with a Fitbit before being underwritten.

Like mentioned above, John Hancock Financial has said that policyholders who sign up for its vitality points program will pay a lower starting premium. But, the company has also stressed that a policyholder’s premium could increase if they can no longer maintain the required healthy lifestyle.

This means that using Fitbit technology could put pressure on policyholders and force them into making certain choices. For example, a policyholder could be forced to not eat certain foods so they can keep their weight under a certain level. They could also be forced to do a certain amount of daily exercise, even if they don’t the time or desire to do so. Essentially, policyholders wouldn’t have the freedom or the flexibility to make their own life choices.

Security and privacy are also major issues when it comes to using this technology. As previously discussed, the Fitbit can record a policyholder’s private information. This information goes directly to a life insurance company. Even if this company promises that the information it is getting will be safe, policyholders have no way of guaranteeing that their private data won’t be shared with someone else or used for other purposes. After all, companies have been hacked or have illegally sold private data before.

While using Fitbit technology for life insurance purposes has a few good advantages, the potential negative impacts from implementing this practice are just too great to ignore at the moment. More research and study is definitely needed before other companies start following in John Hancock Financial’s footsteps.

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  • Ami Maishlish
    October 21, 2015 at 4:19 pm

    This practice deserves to be frowned upon in the strongest terms! Life insureds are not dangerous criminals, terrorists, or sex offenders who need to be tethered to electronic devices to track their minute by minute activities. The mere thought of the idea of subjecting consumers to this type of maltreatment by a for-profit financial institution is revolting to say the least…and I am trying my best to use the mildest term that comes to mind.

    • LSM Insurance
      October 21, 2015 at 7:47 pm

      Hard to imagine a practice like this 10 or even 5 years ago.