Wrap of Week #40: The sixth Daily Fintech thematic week on Wearables

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A thematic week about wearables, from your wrists to your eyes! Despite the fact that we are nowhere close to an explosion phase in wearables for financial services, the insights gained are an important part for tracking the trends in the IOT space.

The 6th thematic week started with an overview of the technologies and a look at the capital suppliers of this sub-sector: Introducing Wearables Week on Daily Fintech

Wearbales are participating in empowering DIY: Checking investments from your wrist or your eye

In ‘Wear’ to next for business first wearables?, we looked at the business owner’s point of view and from his customer’s point of view.

Health and life insurance could change dramatically but there are three major obstacles: Wearables could help to heal Health & Life insurance

The week ended with insights on consumer banking, where wearables could make basic financial services invisible: Wearables for the PostBanked Hyper Efficient Economies

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Wearables for the PostBanked Hyper Efficient Economies

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For the Intro & Index to Wearables Week, please click here.

Our thesis at Daily Fintech Advisers is that consumer banking innovation is coming from two poles – the UnderBanked and the PostBanked. 

Wearables impacts the PostBanked. These economies are characterized by high productivity, high labor costs and plenty of disposable income. So people in these countries a) have the money to buy wearables and b) have the motivation to save time, even small amounts of time.

We call the final phase PostBanked because while banking is still very much needed, it becomes invisible, just part of the fabric of our every day life.

Of course, every country has people with high productivity, high labor costs and plenty of disposable income. However the big changes come with network effects when the majority switch to using these new services; as Clay Shirky puts it in the brilliant Here Comes Everybody, technology becomes interesting at a societal/economic level when it becomes technically boring (i.e when it’s a commodity that “everybody” has).  Thus countries where the majority of people have high productivity, high labor costs and plenty of disposable income are where this kind of change happens first.

Examples are the Nordics (Denmark, Sweden, Norway, Finland) and Switzerland and maybe Luxembourg, Germany, Austria, Japan and Netherlands.

My brick is the new laptop

My “brick” is what I call my iPhone 6 Plus. It is powerful enough as a communication device that I can often leave my laptop behind. So my laptop becomes the new desktop and my “phone” becomes the new laptop.

But my brick is big and a power hog. I can lose it and it can tear a hole in my pockets and I am a slave to power outlets.

If somebody made a smaller form factor with weeks of battery life that served as a good communicator, my brick would be left behind more often.

As we described in the opening post on wearables, this is still science fiction. There is as yet no product that tempts me to leave my brick behind.

The point is we don’t need more power, so Moore’s Law turns to smaller and cheaper. So this new form factor will come. Then the new small form factor (watch, glasses etc) will need some Smart Filters and Augmented Intelligence.

Smart Filters and Augmented Intelligence

A new small form factor means we need something to filter all those notifications that every service wants to send us because that is how we get the attention of consumers. That means smart filters (which we will set using a big device like a laptop) plus cognitive computing to deliver us really useful information when we need it and in context to what we are doing.

That will enable the next big change – when a bank comes to us.

Consumer Banking 3.0 when the bank comes to us

The evolution of Consumer Banking is:

  • Version 1: We physically go to the bank (branch or ATM)
  • Version 2: We digitally go to the bank (website or mobile App)
  • Version 3: The Bank comes to us, in context to what we are doing.

The 3.0 iteration can be done using a smartphone brick, but it is done better using a smaller form factor that we never leave home without and rarely have to recharge and that looks nice and has some useful services.

Today we see payment via wearables e.g. iWatch. The next step is a PFM app that helps us keep track of spending and we are seeing these emerging.

This is still early days in the use of wearables for consumer banking, but the potential is significant. When these services go mainstream, cash will become a relic a bit like vinyl records. However it is still very early days.

Innovation by Banks in Wearables:

Lloyds Bank pushes offers to Smart Watches.

La Caixa offers contactless payments via wristbands

St George Bank (part of Westpac) offers balance info via Smart Watches

Westbank in New Zealand uses iBeacon and Google Glass

The only startup offering something that I can envisage using today is GustPay, with a niche around payments at live events. They impressed me when I saw them launch at Barclays Accelerator two years ago. However, per Crunchbase they only raised $100k and that was 2 years ago, so traction maybe weak.

I note a lot of activity in 2014, less recently. Some tech takes time to get real market traction.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

 

 

Wearables could help to heal Health & Life insurance

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For the Intro & Index to Wearables Week, please click here.

Buying Health & Life Insurance today is like filling in a form to tell Netflix what movies we say we like at that moment in time – versus what movies we actually watched recently. You fill in a snapshot report of your health, with blood samples and other tests run by a doctor and the premium is set. The fact that you later put on 40lbs and developed diabetes – or gave up smoking and alcohol and ran a marathon and reduced your blood pressure – impacts Insurance risk but is ignored by Insurance companies.

 Wearables could change all of that and revolutionize health and life insurance by a) personalizing insurance and risk and b) changing the delivery of healthcare. But first, there are three big hurdles to overcome.

 First we describe how wearables could change the world of health and life insurance with two visions – personalized insurance and augmented intelligence for healthcare workers. Then we look at the three big obstacles.

Vision # 1: Personalized Insurance.

Like Netflix or Amazon recommendations, Insurance could be based on a dynamic rather than a static view of health, fed by data signals from our wearables. Our premiums would go down as we became healthier and vice versa. Becoming healthier would not only make us feel better, it would also save us money.

Imagine an investor basing a decision on a 10-year-old financial statement. That is how Insurance companies work today, with a one-time snapshot of our health. Wearables could give Insurance companies the equivalent of real time financial reporting. That is a big deal.

Vision # 2: Augmented Intelligence for healthcare workers

Health Insurance cannot change the game. It is the delivery of healthcare that matters. Wearables could give healthcare workers augmented intelligence that enable them to deliver healthcare that is better, faster, cheaper.

That improved healthcare delivery could be packaged by next generation health insurance companies into genuinely affordable healthcare.

That is an even bigger deal. Of course, with this much money at stake, politics could get in the way and lobbyists could stop it happening. The obstacles – which we will come to – are real and could be dressed up to kill any progress in this area.

Sensors that track your sports achievements are fun, good for bragging and high fives. For people with medical issues, sensors that monitor vital signs such as heart rate, pulse, blood pressure could be the equivalent of data feeds for financial traders. They give glimpses into a complex system (global financial markets, human body) that can be used by highly trained workers. With the addition of cognitive computing/AI to parse all that data flow, imagine an exchange like this over chat bot:

Patient: I am not feeling well.

Healthcare worker: I can see why; your xxx vital sign does not look good. I suggest you do yyy right now and let’s schedule some time so I can run some more tests.

I am deliberately using “healthcare worker” rather than “doctor” as the latter is a regulated, controlled definition and many tasks could be performed by nurses or health aides of various types. The key is that all the healthcare workers are empowered by data and AI processes. Their intelligence is augmented just like a Hedge Fund trader’s intelligence is augmented by data and AI processes.

Corporations that self-insure could drive this.

Corporations that self-insure have aligned motivations – healthy employees cost less for healthcare and are more productive. The company to watch in this space is Accolade (which recently raised $70m).

Big VC Money going into Next Gen Health Insurance

The reasons why VCs love investing in Health Insurance is pretty obvious – it is a massive market and very broken i.e. customers urgently need something better (ask any consumer what they think of Health Insurance or look at Net Promoter Scores). However, it is very hard to fix. You can say that curing cancer is a big market and customers want something better but that does not mean it is easy to find a cure for cancer.

You cannot change Health Insurance in any significant way unless you can also change the Provider side. That is where VCs have an advantage. They can see that the innovation in digital health is for real. Funding for digital health is on a tear. So that will make innovation on the Health Insurance side more likely. This is where data from Wearables will intersect with Next Gen Health Insurance such as:

Oscar Health which we profiled here.

Bright Health is interesting because this was an $80m Series A ( a lot of money for a first institutional round). There are two VCs (NEA and Bessemer) and both are top tier and have deep pockets; one assumes big follow on rounds will be needed for them to have an impact on such a massive market with big entrenched incumbents. This is not a garage startup with some young techies with a Minimum Viable Product. The CEO, Bob Sheehy, is the the former CEO of United Healthcare. The best analysis is in Modern Healthcare magazine. This is a full stack regulated venture aiming to be an alternative to existing insurance companies.

Clover Health is also a full stack regulated insurance startup. Consumers can buy Health insurance today (as long as you are in New Jersey, Health insurance has to grow state by state). Their round was Series C, so they are more developed than Bright Health, but this is a market where a top team with plenty of capital can do well by learning from those who were early in the market – it is not necessarily a game with first mover’s advantage. Clover Health has an interesting focus on the doctor. The idea seems to be that if doctors have an easier time on the paperwork front the best doctors will want to work with Clover, which will benefit consumers.

Outside the US, VitalityHealth, originally from South Africa, is an early pioneer of wearables before they were called that. They have expanded globally through partnerships; they moved into the UK, with Pru Health and China with Ping An. In the US they have the novel strategy of partnering with 6,000 gyms; they can track actual attendance from a swipe of their membership card.

Atidot and Life Insurance

Atidot is an Israeli startup (classic ex military where they were in the Technological Unit of the Intelligence Corp). They use predictive analytics that can help Insurance with the basic but difficult to answer question – when will this person die? Classic Insurance Actuarial process looks at static data such as age, sex, job and location. Wearables data can give a dynamic view of Health. The world is non-linear and data science for predictive analytics does not follow a linear model. Data is modeled to show different correlations of risk to key variables.

Reality Check # 1: devices not ready for prime time.

A 2014 survey by Strategy Meets Action (SMA), a Boston-based research firm found that 22% of insurers are developing a strategy for wearables. Ironically, the same survey also reported that only 3% of these insurers actually wore a wearable device themselves.

In other words, the theory is good but wearables are not yet ready for prime time (as we covered in our opening post in this theme week).

Reality Check # 2: PreExisting Conditions

One lasting legacy of the Affordable Care Act (aka Obamacare) is that consumers cannot be denied coverage based on a pre-existing condition. That is a problem if the wearables data shows we have a new condition such as Diabetes. We want our Insurance to go down when our health improves, but we don’t want it to go up when our health declines.

Reality Check # 3: Data Privacy

Privacy regulation varies by jurisdiction, with Europe tending to tougher than USA; but even in USA in some States you must communicate to consumers if you use factors such as gender, age, zip code in pricing.

For Wearables to impact Insurance premiums, policyholders must be willing to share data with the Insurer. This maybe an area where Millennial attitudes to privacy (it’s done, put a fork in it) may rule. Or there maybe consumer and regulatory backlash as the data is so sensitive. The companies will need to prove that their aggregated anonymous data cannot be reverse engineered to create Personally Identifiable Information (PII); any hacker that breaches that will create a reputation crisis, so it has to be really secure.

These are real obstacles, but entrepreneurs treat obstacles as something that defines their action list. They find a way to solve those problems. Given the scale of the opportunity, somebody will surely solve them.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

 

‘Wear’ to next for business first wearables?

For the Intro & Index to Wearables Week, please click here.

Mention wearables, and most of us immediately think consumer first – the Apple Watch, Fitbits, Google Glasses and so on. But when it comes to business or enterprise applications for wearables, many of us draw a blank.

The challenge for many of the companies that create wearables (Apple, Google etc), is the runaway success their mobile applications have already had in the market. In order for wearables to really step out of the shadow of smartphones then they’ll need to do things our phones can’t do, or do them better. We’re seeing this already in the consumer wearable space to some degree – Fitbits are marginally better than phones.  But when it comes to business focused applications, the complexity of what is required to deliver a superior experience is harder to realise.

So in the small business landscape, how could this play out? I see two distinct sides to this wearable coin. Either wearables will have to make it more convenient for consumers to pay a business or they will have to help a business owner manage their business more effectively. These tend to be the two largest friction points for a business owner when it comes to growth. Solve these, and you’ve got a killer product.

Looking at wearables from these two perspectives can help us understand how the sector could play out over the coming years. The first side of the coin is the easiest, as helping consumers make payments more easily is where most of the fintech applications of wearables has been focused.

Take RFID enabled wristbands for example. These are old news for millennials who’ve been frequenting festivals like Coachella. Companies like Intellitix are leading the field here. Festival goers simply load up their accounts before they arrive, then tap their wristband against a card reader or mobile app at a small business owner’s stall. This is great for the small business owner who now doesn’t need to handle cash or install a temporary merchant facility.

The line between wearables and biometrics is also blurring. Nymi is a company developing wearable devices that use a heartbeat to identify an individual and authenticate a payment. It’s another technology that promises to reduce point of sale frictions. How? Well, when a customer no longer has to reach for their wallet or open an app on a phone, precious seconds can be shaved off a sale. In a busy retail environment, seconds are not inconsequential.

Some banks are in fact on the front foot when it comes to payment focused wearables, seizing the opportunity to build partnerships with businesses to bring new wearable devices to the market. Barclays is one of these banks. Its bPay solution already has brands like Topshop, Garmin and Mondaine on board, who have designed devices that are compatible with its bPay chip, linked up to a credit or debit card. Whether the cost of partnering with bPay is affordable for small businesses is not clear, however the bank is openly calling for business partnership enquiries.

On the business management front, Apple leads the field in enabling business owners to be more productive via their Apple Watch. Companies like Salesforce and Evernote have already started to replicate their mobile offerings on Apple’s latest platform.  And for small business owners, Invoice2Go on the Apple Watch is probably one of the more useful tools. Simplify Commerce is another useful tracking tool available on the watch and powered by MasterCard.

So ‘wear’ to next (excuse the pun)? Well, wearable banking is probably the next big trend, superseding the now mundane concept of mobile banking. In fact St George Bank in Australia is already promoting their wearable smart watch apps, as are a number of other banks. However the key thing will be whether wearables can move beyond the realm of simply replicating your mobile app, just on a far smaller screen.

Managing incoming payments is one area that today can be fragmented across online platforms, and between online and offline merchant facilities. What will be interesting is how ubiquitous payment platforms like PayPal could continue to build market share by offering better synced reporting across multiple devices, including wearables. We’ve already seen how banks that fell behind on mobile reporting lost out to more nimble competitors. Wearables will be no exception.

While direct wearable applications in business are still hard to find, there is no question companies are keen to embed themselves even further into their customers worlds, to remove frictions and increase purchasing opportunities. And being physically worn by your customer certainly makes the idea of being omnipresent a lot easier to achieve.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Checking investments from your wrist or your eye

We live a world that we still check our wealth from our laptop or our smartphone.

For the Intro & Index to Wearables Week, please click here.

Tim Cook is leading us to check our wrist for our health. Wearables for our finances, are still in the “nice to have” category and nowhere close to becoming the next black. Will Goldman Sachs change that, with some Marquee version for our smartwatch; that will make every yuppie envy those that have access to it?

Pact is the best app that you can earn cash for achieving your fitness and wellness goals. Users can earn cash for being active, paid by members who don’t. (Warning: not available for iwatch; GPS running in the background will drain your battery). Banks could lure customers with this type of “health money” that could be incorporated in their royalty programs.

Seems however, that nobody feels that there is a great opportunity in the shift from the mobile device in our handbags, to our wrist or to our eye (i.e. Google Glass). Blockchain is stealing the show, as a potential way to store securely biometrically collected data; and then create value. Smart watches and Smart Eyeware, have not hit any tipping point and therefore, are not seen as The Way, to collect Big data for financial services. Most finance apps for our wrists (none commercialized for our eyes) are only functional in tandem with our smartphones. The majority have bene focused on very basic consumer banking services (tracking expenses, credit cards).

While researching the wearable space in financial apps, I realize that almost all of them are focused on information, alerts, monitoring and KYC. I checked amongst brokers and broker-dealers; I had to dig and dig to make sure that the apps are available for android or ios watches, and only to discover that very few are offering trade functionality. The first mover, is London based brokerage and spread betting provider, IG Group; with their Apple iwatch app that allows for trading in CFDs and stocks.

screen-shot-2016-09-23-at-6-09-52-amIG Group app screenshots

Ameritrade is the other app WITH execution capability.

From the Fintechs, Robinhood has been keen to offer both apps (Apple store and Google Play) for clients and Buy-Sell capability. All other apps, once you decide to transact you need to switch to your smartphone. Openfolio, offers portfolio tracking and comparison to other investors in the network. SigFig offers similar functionality. StockTwits app with their social focus, is in the game.

From broad app developers, there are lots of android apps to monitor the market on your wrist:

Finance Stock Watch, offers a clean snap of one stock or index a time, color coding the moves of the financial asset.

Quote Face, can show holdings in your portfolio on the watch.

Stock Ticker, checking on your finance and your investments.

Similarly in the Apple store:

Stock Tracker, offers real time quotes, pre-market and after hours quotes, portfolio monitoring, tech charts, alerts (smartphone app has swipe to trade functionality with multiple brokers but not the smartwatch one).

Stock Pro, is another comprehensive real time stock app.

From the large incumbents:

Fidelity mobile for Apple Watch, was one of the first movers when the Apple Watch debuted 1.5yr ago. Their app has real time data and alert functionality.

E*Trade, the old time disruptor, also launched a smartwatch version, again with similar capabilities as their mobile sites but no execution.

Charles Schwab invites its clients to discover and initiate a trade (one watch screen covers markets and the other your Schwab watch list or portfolio) from their wrist and then switch to their phone to complete the transaction.

AJBell Youth, has Ios and Android apps for assisting customers on the go.

Social trading platforms like EToro or Zulutrade, don’t have smartwatch versions of their mobile apps. FX trading, has more advanced market monitoring and charting apps, like Swiss Dukascopy app and Japanese SBI FX trade app.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network.  Efi Pylarinou is a Digital Wealth Management thought leader.

Introducing Wearables Week on Daily Fintech

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This week is all about Wearables. This is part of a series where we look at impact of different disruptive technologies on Finance. In the past we have covered Blockchain, Artificial Intelligence, Regtech, Chatbots and XBRL.

Today is a background briefing on the technology and its broader implications. Then on Tuesday we do WealthTech, Wednesday is Small Business Finance, Thursday is InsurTech and Friday is Consumer Banking.

Bookstop or useful?

VCs are salivating. Instead of just one mobile device, we can be persuaded to have our whole body festooned with them. Fitbit did an IPO, Apple launched the Watch, Facebook bought Oculus, etc.

However, evidence mounts that we buy them and give them as presents but don’t find them as entertaining or useful as the PR would have us believe.

There is lots of excitement in the market:

  • Fitbit began 2016 the same way it finished 2015: as the undisputed leader in the wearables market and the company is valued (in the public market) over $3.8 billion.
  • Xiaomi supplanted Apple in 1Q16 and captured the number 2 position.
  • According to Apple, the Watch has met the company’s expectations.
  • Garmin finished slightly ahead of Samsung with wristbands and watches.
  • Samsung landed in the number 5 position on the success of its Gear S2 and Gear S2 Classic smartwatch.
  • BBK tied with Samsung for fifth place worldwide.

But here is a reality check:

  • The Apple Watch did not make a dent in the numbers for Phones and Laptops.
  • An app on the phone we already have does a lot of what these. devices aim at. The games are getting better. There are apps for many sports (the one that tracks speed for skiers is a personal fave).

Device issues – battery, wifi

The reality is the products still need some technical work. Batteries need to last weeks or months, not hours or days. Otherwise it is just another hassle. Each device needs to be able to communicate standalone, not via our phone. Until that happens we all end up as amateur systems integrators pressing buttons on a help desk service in angry frustration.

They also need to be smaller and lighter. Then a bit more fashion sense will help – we don’t all love geek chic. Imagine a world where instead of wearing a smartband or smartwatch to track activity and heart rate, we could just put on our favorite shirt. The buttons on that shirt would capture data from our bodies, source power wirelessly and communicate to the world to the services we want. This “nanny button” will tell us when to hydrate, when to get out of the sun, when to take it easy, and when best to sleep.

Moore’s Law is relentless and the money to be made is huge, so we can be confident that all these things will happen.

Health

There are fun devices and there are useful devices. For people with medical issues, wearables can be – literally – a lifesaver. They can do things that previously we had to go to a doctor to have checked. They can alert somebody in an emergency and take continuous blood pressure measurement – and turn us all into Woody Allen.

Data exhaust

Whether we use the device for fun or health, the impact on Finance is all about the data that they output. Devices can capture the wearer’s location, activities and biometrics. This is a goldmine that can be used to personalize products and services, such as relevant account alerts and offers. The cashier (probably a machine not a human) can detect you are in line and ready to pay and line up your preferred method of payment.

Privacy & data ownership

Data exhaust raises the issue of privacy and & data ownership. This is where Banks could become the trusted repositories of data that we own. That data could be stored in central cloud data centers (today’s reality) or on the Blockchain (tomorrow’s promise). The key issue is ownership and control – a tricky issue when so many business plans are based on monetizing consumer data. 

Security Issues

Payment convenience comes at a price. If the device is lost or stolen, that same data goldmine is available to thieves. The defense is triangulation – something you own (device) + something you know (eg PIN) + something we know about you (eg location).

The crypto defenses are also changing. FIDO Alliance are developing new authentication processes for password-less security options like voice and fingerprint verification.

Bankers are researching wearables

According to one study, 15% have something in the works, and 72% have it on their roadmap for the next three years. 66% cite proximity payment as the play.

Banks will be hard pushed to earn trust in this area compared to trusting GAFA (Google, Apple, Facebook Amazon) and BAT (Baidu Alibaba Tencent). Given the privacy issues of all the ad-driven Internet Platforms, banks have a great potential pitch “they think you are the product, we think you are the customer”. See this post for more.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

It’s all about the data! How wearables tech enables life and health insurers to better understand and engage with customers.

By Rick Huckstep

The tech industry loves its buzzwords. Yesterday it was all “big data” and “cloud” and today we’re talking “wearables” and “Internet of Things”…and tomorrow, the “Internet of Everywhere”?

For the world of insurance, these buzz words are more than superficial. They are more than fashionable consulting speak to hoodwink the industry and keep everyone guessing about what this really means.

For life and health insurers, they mean the ability to improve risk ratings, to personalize the price of the cover and to apply and adjust policy conditions on an ongoing basis. The traditional approach of a single, point in time questionnaire is being replaced by an ongoing adjustment, assessment and review approach enabled by these new technologies.

Through the use of wearables and smart phone apps, the accuracy of evidence-based underwriting is significantly improved (see latest publication from Raconteur).

These new technologies enable insurers to radically shift from being the provider of an enforced product to a provider of a value added service.

And this is not a fad or a short-term trend! A decade ago, there were (only) about 500 million devices connected to the Internet. Today, with a global population of over 7 billion, we have more Internet connected devices than people. Today’s estimates range from 10 to 20 billion connected devices and this is predicted in the next five years to rise to 40 to 50 billion Internet connected devices!

IDC predict that 72 million wearLeaders-in-wearables-market-760x428able devices will be shipped this year, up from 26 million last year and forecast to exceed 150 million devices by 2019. The vast majority of wearables will be wristwear such as the Apple Watch or Microsoft’s HoloLens.

With this massive growth in devices that collect data, it is no surprise that, according to the Norwegian research organization, SINTEF, 90% of the world’s data has been generated in the past two years. Every second, over 250,000 new gigabytes of data are created, which is the equivalent of 150 million new books…I repeat, every second!

It is, therefore, no surprise that I am seeing a new group of tech startups from the data aggregation space focusing on life and health in InsuranceTech.

This week I caught up with CEO and co-founder Jan-Phillip Kruip from Singapore based startup, FitSense. Their data aggregation technology was developed at and subsequently licensed from the National University of Singapore. JP explained to me how their aspiration is to take the approach of telematics for motor and apply it to health insurance.1433219251320

The idea behind FitSense is to develop a tech platform that will aggregate data from the wide variety of wearable inputs in the market. These inputs come from activity trackers such as a Fitbit or Jawbone or a smartphone. Today, a smartphone is equipped with a range of sensors that track all manner of things such as proximity, ambient light and sound, barometer, temperature, motion, acceleration, gyroscope, magnetometer. And all for less than $5 of the total price of the smartphone!

This mass of real time and individualized data in all of its glorious forms is consolidated on the FitSense aggregation platform and normalized. It is organized and processed to create a composite view of the individual, which is updated and adjusted in real time.

The benefit to the insurer falls into two camps. First is that the data aggregation platform takes care of the pain of integrating with lots of different wearable technologies. Second is that the FitSense platform gives out a risk rating, much like an Experian credit score.

As a trusted, evidence based source of risk rating, services such as Moody’s or S&P have become institutionalized in the bond markets. Using Moody’s to illustrate how FitSense works in the world of insurance, imagine a similar system for setting health premiums.

Instead of a single point in time questionnaire to determine your premium and any policy conditions, you had a health insurance rating of AAA based on actual and current data. Like a credit score, this would lead to highly competitively priced premiums and generous policy conditions. However, in the same way as back to back disappointing quarterly corporate results leads to a downgrade and worsening credit rating, this same model would be applied to the health insurance policy.

Insurers could, should they chose to do so, apply increases to monthly premiums to reflect the worsening score from the data aggregator.

At this point, I am going to defer the subject of how insurers would or could handle “bad behavior”. Today, those insurers in this space are only rewarding policyholders for better behavior and they are staying silent on worsening behavior. Where bad behavior is subsidized by the good in the traditional model, this now creates a moral and ethical debate to be had amongst insurers about how to benefit from this new technology. The issue is about segregating customers into good ones and bad ones (based on the evidence from wearables data) thereby potentially creating a class of “the uninsurable”.

1432618504418Coming back to the subject, research from Salesforce.com found that 79% of those companies adopting wearable technology agree that wearable tech is or will be strategic to their future business.

And 23% of companies said that data collection and aggregation was their biggest challenge!

Unlike banking, where the Fintech movement is about radical shifts and disruption, in
InsuranceTech the theme is more subtle and evolutionary. This is what we are seeing here and there is no question that wearables and the Internet of Things plays right into the executive agenda about how to apply new technology to traditional insurance.