For years, car insurance companies have supported the principle that safer drivers should pay lower premiums.
Now, by taking advantage of a new generation of technology designed to help fitness buffs keep track of every step taken and calorie burned, the health insurance industry is suddenly in a position to enforce its own version of that maxim.
Thanks to an unlikely coincidence of technology and law, the ubiquitous fitness bands and health-tracking apps that reside on the wrists and smartphones of millions of consumers have become the most sought-after tools among insurers. The result is a profound change to the way health insurance will be offered in the coming years, as companies utilize a flood of previously unavailable data to reward more physically active customers – and, in effect, punish inactive ones.
"We're in a very big, sweeping change in the insurance industry right now," says Missy Krasner, a special adviser on the digital health-care industry for California-based investment firm Canvas Venture Fund. "Insurance companies are going to have to start getting creative."
The United States is home to the main intersection of the digital health tracker and insurance industries. But slowly, the interest in mobile apps to support positive health habits is becoming a global phenomenon – even in countries with universal health insurance, such as Canada.
Take, for example, an app called The 30 Day Challenge. Developed by the Heart and Stroke Foundation, the iPhone app is part of a suite of digital tools designed to help users reduce their risk of stroke. The foundation's chief partner in developing the app? Desjardins Insurance.
And just as Canadian insurers – both private and government-run – are starting to understand the power of digital tools to influence health habits, so too are private employers trying to curb the financial, social and productivity toll of an unhealthy or inactive work force.
"Within the Canadian marketplace, many employers want to [use wellness software to] see how employees feel about the company, how often they're engaged," says Christina Winkels, co-founder of Sprout At Work, a Canadian startup that builds social fitness trackers for employers. Using the startup's software, companies can design activities, allow employees to challenge their co-workers in various events and post fitness goals and results to social networks – all in an effort to improve employee health and, in the process, boost morale. "Happier employees are more engaged," Ms. Winkels says.
But while many Canadian insurers and employers might like to get their hands on the wealth of new, user-created fitness and health data, the phenomenon has created a looming challenge for the way much of Canada regulates health-related information.
"The regulations that currently exist were built up over many years and make the assumption that health-care information is collected by hospitals and physicians and insurers – you [the individual] have virtually nothing," says Martin Sumner-Smith, a senior adviser on life sciences and health care for the MaRS Discovery District in Toronto. "But soon you're going to see patients coming with a massive amount of data that they themselves have collected. There is no clarity yet on what is legally possible."
But there's another reason Canadian insurers haven't been able to jump on the personal metrics bandwagon in the same way their American counterparts have: jurisdiction.
"The biggest challenge is that a lot of [fitness and health tracker] devices are U.S.-based, so the data is stored on U.S. servers," Mr. Sumner-Smith says. "From a Canadian perspective, they may not conform to privacy requirements."
In the U.S., such hurdles are far less significant. As a result, the same phenomenon has taken on much broader dimensions – in large part because of the ongoing overhaul of the country's entire health insurance system.
Under the newly implemented Patient Protection and Affordable Care Act, American insurers can no longer deny applicants coverage based on pre-existing health conditions. The law strips insurers of a fairly powerful means of maximizing profitability – specifically, denying coverage to anyone whose health records indicate they are likely to make expensive claims.
As such, for health insurers, the rise of the fitness tracker couldn't come at a better time. "Where the industry is now heading is, 'If we can't penalize people for being overweight or sick or having cancer, how can we reward people for healthy behaviour?' " Ms. Krasner says.
But while the lower privacy threshold of fitness data means insurers have a freer hand in collecting and analyzing the information, there are numerous hurdles on the road to building a statistically sound profile of a client based on such metrics.
One persistent problem is accuracy. Because of designer or user error, two different fitness trackers may come up with wildly different estimates of a user's activity levels. But an even bigger issue for insurers is fragmentation. Not only are there hundreds of fitness trackers and apps available, many of them also use cryptic, proprietary algorithms.
"Let's say a power user has one app that's on their phone, but also uses another device just to track running," says Dan Conroy, head of business development for CarePass, a mobile health tracking app designed by American insurance giant Aetna. "That's another data package there."
By all measures, the confluence of health and big data is still in its infancy. However, the trajectory, even now, is fairly clear. In just two years, the number of sensors and monitors that surround the average consumer during every minute of every day has skyrocketed. Not only are fitness monitors cheap and easy to use, many once-unconnected devices, such as scales and refrigerators, are now available with the technology to store digital information about every aspect of the user's life. In addition, companies such as Ford are working with medical firms to design car wellness monitors that measure everything from the driver's weight to ambient air quality.
Given that deluge of personal data, it isn't difficult to imagine a world where the default health insurance policy is "pay-as-you-live" – using constantly updated wellness data to reward active customers with lower premiums, and punish lethargic ones.
"I think we're still 10 to 20 years away…" Ms. Krasner says, "but you can imagine a fully wired-up home and body."