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InsurTech Man: The coming evolution of the insurance industry

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Insurers using Fitbit-like technology to more personal life insurance options

Artificially intelligent software is increasingly crunching consumers’ social media data – and getting health information from apps on their cellphones and Fitbit-like devices – to help companies price and sell life insurance.

“Some of the life insurers have already started offering policies that reward policyholders who record and share their physical activity using wearable devices and more insurers might offer similar products in the next couple of years,” states a report prepared by the tech consulting firm Capgemini.

In the United States, insurer John Hancock’s Vitality Program already encourages policy holders to share their personal fitness information by giving them a break on their premiums and rewarding them with Apple watches for only US$25 plus tax – provided they exercise – and complimentary Fitbits. These track the policy holders’ exercise regimes and help them stay on track with their healthier lifestyles, while giving the company up-to-date information that helps it gauge its risks.

“By applying data analytics on the real-time data received from wearables and other sensor devices, life insurance firms can generate more granular insights to design and customize products based on the risk exposure to each customer,” reads the Capgemini report.

That’s leading to things like cheaper, short-term life insurance targeted to tech-savvy Millennials.

“Your experience with life insurance will become more convenient and the products will become more personalized,” predicts Nate Root, vice president of data and analytics for the insurance industry at Capgemini.

“You’re going to be able to buy short-term life insurance when you go on trips,” he said.

Canadians headed to exotic locales often buy health insurance which covers medical needs and typically has a smaller death benefit than regular life insurance policies. But the insurance industry’s growing love affair with financial tech means consumers will soon be able to get life insurance policies for periods as short as a vacation abroad.

In its Top 10 Trends in Life Insurance 2018, France-based Capgemini outlines how the use of powerful, online technology is likely to be a game-changer for the life insurance industry.

Driven by intense competitive pressures that are squeezing margins and a shift in customer preferences towards greater convenience, increased use of technology and more personalized life insurance policies, companies are jumping onto what is being dubbed the InsurTech bandwagon, the use of technology in the insurance industry.

Google and Facebook-type algorithms, e-commerce websites, wearable computer gizmos, and the software spine for cryptocurrencies like the Bitcoin are all being enlisted by life insurance companies to grow their market and boost their profitability.

“The InsurTech phenomenon has moved from being a buzzword to becoming a potent insurance business disrupter,” reads the Capgemini report. 

Atlantic Canadians among most insured

Atlantic Canadians are among the most insured people in the country, according to statistics.

Pelletier thinks the higher-than-average number of people with life insurance in Atlantic Canada stems from seniors' desire to avoid burdening their children.

“Older people are more cautious … because they know their death is going to come sooner rather than later,” said Pelletier.

In all, roughly 1.5 million Atlantic Canadians, or about 64.8 per cent of the population of these four provinces, had life insurance in 2016, the last year for which Statistics Canada has a population census.

That regional average is largely driven by the higher-than-average demand for life insurance in New Brunswick and Nova Scotia, Canadian Life and Health Insurance Association figures reveal.

While only 47 per cent of British Columbians and 48 per cent of Albertans had life insurance in 2016, New Brunswickers were second only to the residents of Quebec to be covered with this type of insurance, said Anthony Ng, the life insurance industry association’s manager of statistical services, in an interview.

Fully 71 per cent of New Brunswickers had life insurance in 2016. The comparable figure in Quebec is 77 per cent.

With a life insurance market penetration of 55 per cent, Islanders are roughly as likely to be insured for their eventual passing as Manitobans or residents of Saskatchewan. Newfoundlanders are tied with Ontarians with 59 per cent of people in each province having life insurance.

Bluenosers seem to share a similar attitude to that of their neighbours in New Brunswick. In 2016, 61 per cent of Nova Scotians had life insurance, marginally higher than the national rate of 60 per cent.

Pot, assisted death new challenges for industry

Rapidly evolving technology isn’t the only big trend in the Canadian life insurance industry. 

The federal government is moving to legalize recreational marijuana within the next year and medically assisted dying is already here.

Wendy Hope, vice president of external relations for the Canadian Life and Health Insurance Association (CLHIA), says neither recreational pot nor medically assisted death will have any impact on the death benefit paid out by insurance companies.

“If an individual already holds an insurance policy, the fact that they died with cannabis in their system would have no bearing on the death benefit being paid as set out in the policy,” she said.

According to Hope, insurance companies are not expected to treat medically assisted deaths as suicides because these are now legal.

Lawyer Michèle Pelletier, New Brunswick’s consumer advocate for insurance, agrees.

“It’s going to be considered not as a suicide but as a medical procedure, so you will get the money from your life insurance company,” she said.

Smoking or ingesting recreational cannabis products, though, might affect the amount Canadians will pay for their life insurance. In an interview, CLHIA vice president of underwriting and policy Brent Mizzen said he would need to check on the evidence of marijuana’s health impacts before being able to comment on whether recreational pot use might increase – or decrease – the premiums Canadians pay for life insurance.

“The issue that applies is what the health impact will be of smoking marijuana,” he said.

Enter the robo-adviser

While it’s still a matter of speculation how the technology will impact the role of insurance agent, Nate Root, vice president of data and analytics for the insurance industry at Capgemini, is convinced robo-advisers, bits of artificially intelligent software, will soon be able to engage consumers by asking them routine questions such as their age, health and gender then come up with various product recommendations based on their needs.

“You could use them online or, in a more futuristic scenario, it could be the voice-activated device in the middle of the room,” he said.

Instead of a face-to-face conversation with an agent over a cup of coffee, Canadians might soon have the option of buying life insurance policies from companies after conversations with these robo-advisers who will chat with them through Amazon Echo, Google Home, Jibo or other voice-activated devices. 

According to Root, these robo-advisers may do to life insurance sales jobs what automated teller machines (ATMs) did to bank teller positions.

“Look at ATMs and what that has meant for bank tellers,” said Root. “What we find now is a pretty steady mix of tellers and ATMs.”

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