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Understanding Property/Casualty’s ‘Unwellness’ Epidemic

By Jim Weiss November 17, 2016

Often situations occur because the individuals involved are overtired, anxious, or impaired when "unwellness" befalls them. These are typical examples of how an epidemic has been plaguing insurers’ profitability. Fortunately, insurers are beginning to see how consumer wellness technologies may lead the way to reducing the glut of “unwellness” epidemic-related claims.

Note: This is the first in a four-part series about wellness in property/casualty insurance.

Consider the following scenarios:

  • An exhausted commercial vehicle operator is daydreaming behind the wheel and rear-ends another car, resulting in thousands of dollars in damages.
  • An anxious assembly plant employee hurries to meet a production quota and throws out her back.
  • An injury claimant's slow return to work prolongs the wage loss claim payment period.

Nobody wants situations like those to occur, but they do repeatedly—often because the individuals involved are overtired, anxious, or impaired when "unwellness" befalls them. These are typical examples of how an epidemic has been plaguing insurers’ profitability. Fortunately, insurers are beginning to see how consumer wellness technologies may lead the way to reducing the glut of “unwellness” epidemic-related claims.

Treating the symptoms

Over the years, insurers have tried to address the unwellness epidemic using tools of varying effectiveness in preventing situations like the above from happening. For nearly two decades, usage-based insurance (UBI) has allowed auto insurers to monitor vehicle operation and provide incentives for policyholders to drive more safely, without necessarily identifying the underlying cause of poor driving as fatigue.

In workers' compensation and other commercial lines, insurers have:

  • developed extensive risk consulting practices to help employers manage workplace hazards
  • introduced rating plans that offer financial incentives to commercial policyholders to maintain healthy premises
  • created return-to-work programs that help claimants recovering from illness or injury to resume fulfilling work lives faster than may otherwise be possible

Those solutions may indicate altruistic intent, and may be a step in the right direction, but their effectiveness may be limited because they treat certain types of observable situations (e.g., irresponsible vehicle operation, workplace hazards, slow recoveries) rather than target wellness-related problems endured by policyholders which lie beneath the surface.

Wellness worn on the sleeve

A recent report by PricewaterhouseCoopers suggests that nearly half of individuals between ages 18 and 64 own at least one wearable device, with health improvement cited as the most common motivating factor behind purchasing such technology.

Wearable devices include fitness tracking wristbands, smart watches and glasses, and smart clothing. Most of them are capable of measuring behaviors such as physical activity, heart rate, and sleep quality or quantity. Such patterns relate very closely to the causes of the situations described above, including whether a vehicle operator is well rested, a worker is feeling anxious and could benefit from a break, or a claimant is (or isn't) resuming activity levels that would facilitate a return to work.

In fact, according to an article in Fortune magazine, many employers are offering their employees wearables in the workplace to help reduce healthcare costs—and seeing voluntary adoption rates of 50 to 80 percent among employees! Because of the proliferation of wearable devices, the data needed to understand and improve on certain aspects of the unwellness epidemic has become more readily available.

Property/casualty industry getting better

The life and health insurance sectors have taken a leading role in meeting the demand for improved wellness opportunities, with some insurers offering free fitness trackers and awarding discounts to policyholders who achieve target activity levels (which improve health and life expectancy).

The benefits of focusing on wellness also have not been lost on property/casualty insurers. One leading personal lines carrier recently envisioned itself as a “life management company,” while another large property/casualty insurer commissioned a report about “helping people live their lives with less worry” (which it views as a key business objective).

Large personal auto insurers have obtained patents that involve using biometric data such as measurements of stress levels and mindfulness to help evaluate risk behind the wheel. On the commercial lines side, a leading international insurer recently invested in a company that develops wearable devices and artificial intelligence to reprogram behavioral patterns that cause workplace injuries. These property/casualty initiatives may potentially increase public wellness and promote a refreshingly constructive bond between insurers and policyholders.

Understanding challenges and opportunities

The opportunities in wellness for insurers are nearly undeniable given the causal relationship between policyholder well-being and insurer success. A sign of where these opportunities may lead was shown in a recent Accenture report which notes the $500 billion market capitalization of the burgeoning consumer health and wellness industry—which some have called the “next trillion dollar industry.”

Insurers are in a unique position to promote the benefits of wellness technologies. At the same time, wellness data represents another potential increase in the precision of data used for risk assessment and mitigation and will likely need to be brought to market with commensurate discretion. Opt-in approaches, such as those being exhibited in life/health (and usage-based auto insurance) will be a virtual must, as will consultation with regulators and consumer advocates to design programs with clear consumer benefits.

We at ISO are researching various ways that property/casualty insurers can use wellness programs. Please participate in our survey and enter for a chance to win a free Fitbit. Your individual responses will be confidential. We plan on sharing the aggregate results after the survey is completed.

If you’re interested in learning more about the impact of wellness on insurance or have any questions, please contact me at jim.weiss@verisk.com or (201) 469-2216.