The IRDAI working group set up in December 2017 to examine innovations in insurance involving wearable and portable devices has published its recommendations. These recommendations will help the insurers assess risks better and can lead to reduced insurance premium for customers at the time of renewals.
Wearable devices can lower health insurance premium
The insurers will be able to discount the health insurance renewal premiums by 10% to 15% depending on the policyholders’ health and activity data. The product pricing and premium review could be based on the inputs received from the health data captured through the devices.
Tracking the policyholders’ health data will not only help promote a healthy lifestyle but also play an important role in underwriting exercise in both, life and health insurance.
Critical role in risk assessment
The report says, “The usage of wearables data in health insurance will have a critical role in risk assessment and improvement. Currently, insurers merely have access to a point-in-time data through medical tests or self-disclosures, which are often not adequate for risk assessment on an ongoing basis.”
The report also recommends that the insurers be allowed to provide incentives to customers either as discounts on premiums or any additional benefit that is clearly defined, and the specifics of such benefits are filed with the regulator as part of the product filing procedure.
Depending on its viability, the insurers can add the wearable data pricing option in the existing products as well. This should, however, not result in higher premiums or changes in terms and conditions that are in force currently and should be done with the consent of the insureds.
Telematics to track drivers on the road
The report has also recommended installation of smart telematic devices to track the driving habits of policyholders. This can lead to substantial adjustments in motor insurance premiums and promote safe driving culture on Indian roads. India has the dubious distinction of globally leading in fatalities caused by road crashes. 150,000 people die on Indian roads annually due to road crashes.
The introduction of telematics can also provide additional benefits by way of fuel conservation as drivers become more responsible.
The report says, “Motor Insurance in India is being priced based on parameters like the make and model of the vehicle, its capacity and the geographical use. There can be several other aspects to the use of a vehicle. Consideration of these factors (in underwriting) will lead to a more meaningful risk assessment and provide for a more accurate mechanism for pricing.”
Value added services
The working group’s recommendations also speak about value added services (VAS) as a by-product. It says that insurers should be allowed to provide VAS using IoT as a by-product and to recover the cost of the device in the product pricing by explicitly mentioning it in the policy document. This would also encourage preventive maintenance of their assets like cars, safe driving habits, and a healthy life style.
This would also enable home insurance policies to provide services for problems such as minor repairs for water supply, electrical work, gas supply line work, small workmanship required for furniture.
Data privacy would be supreme
The report, however, says that the consent of the customer to share his/her data is a must for participation in such products. The consent should be for specific data and the specific purpose for which it is being obtained. In all instances, the security and confidentiality of customer data shall be protected at all costs.
Regulatory framework for InsurTechs in India
Besides giving recommendations regarding the regulatory approach towards InsurTech in India and data related aspects, the report has listed recommendations on evolving a regulatory framework for InsurTech and challenges in supervision.