Did your Cyber Monday purchase this year include a smartwatch or lifestyle activity tracker?

According to a new report from Signals and Systems Telecom, global machine-to-machine (M2M) and wearable devices could help “internet of things” service providers pocket as much as $231 billion in service revenue by the end of 2020.

And while the average consumer probably thinks fitness bands or Apple watches when they hear “wearable tech,” new innovations abound in the area. Sub-categories of wearables—coined “hearables” and “implantables”—are within grasp, introducing futuristic capabilities and possibilities as well as a host of insurance implications.

Businesses are now presenting employees with implantable chips to replace ID cards and passcodes. Wristbands will soon measure nearby chemical exposures—ideal for catastrophic or chemical spill scenarios. Medical companies are looking into “smart band-aids” to inject medicine when needed. And there’s hope that new devices will give audio cues and voice activated commands to the visually impaired.

“There is an explosion of activity in terms of what’s available in the marketplace and how rapidly the devices are evolving,” says Mark Breading, partner at Strategy Meets Action. “Insurers in general are taking it pretty cautiously in terms of investigating and doing pilots. There isn’t a lot that’s visible out there in terms of companies who have fully embedded something in coverages that’s related to wearables, but I think 2016 is going to be the year when we start to see that happen in waves.”

Personal Effects

The life-health side of wearables is already on fire. John Hancock Life Insurance has partnered with the Vitality wellness program to distribute Fitbit bands to policyholders alongside discounted coverage. Meanwhile, Google and optical coverage specialist VSP offer subsidized prescription lenses for smart glasses to VSP insureds.

“Next year, I expect to see many life-health insurers either giving discounts or giving away different kinds of health monitoring devices,” Breading predicts. “It’s an information exchange thing because the policy holder is saying, ‘I agree to give you information about my body and health on a real-time basis in exchange for a premium reduction, or maybe advice on healthy living and helping me to stick to my treatment plans.’”

This last point comes in handy for the workers compensation and disability market in particular. With access to how strictly an individual is following a recovery or treatment plan, insurers and employees have proof regarding appropriate timing for return to work.

“We’ve all heard the workers comp stories where someone is out, they’re getting payments and then they post a picture on Instagram of them skiing,” Breading says. “It’s a lot easier to [avoid] that when you have some wearables tracking location and activity levels. There are two sides of it: Are you taking your medications, are you following the treatment plans? And are you engaging in activities that indicate that you really should be going back to work?”

Breading anticipates wearable developments akin to usage-based insurance from a risk, underwriting and pricing standpoint.

“We know more about your real-time risk, and in exchange we’re going to give you a premium discount—I think that’s going to be the value proposition in this first wave,” Breading says. “But then just like telematics, it will expand into more of a relationship where there is advice given and potentially it will be a true usage-based insurance where the premium might vary by month, where real-time advice might be given and things like that.”

Virtual Reality

But wearables can also impact more than just individuals. According to Breading, on the property-casualty side, “there’s a huge amount of activity testing of emerging technologies like the Internet of things, gamification and drones.” He adds that the commercial p-c market could also experience wearable infiltration as businesses and insurers begin to work together to use the tech for improving internal development.

Companies are already using wearable technology to do business better, increase internal operational efficiency and produce fewer loss control claims. But coverage advances are still in the development stages. The new capabilities create a host of options when it comes to policy construction, and insurers are taking their time testing the tech and considering their alternative uses.

“When you’re putting together a loss control program for a midsize or large commercial account, there will be a lot of things for insurers to do to collaborate with these customers to understand, ‘We’ve seen these kinds of wearable devices used to protect workers or improve safety or to reduce fraud,’” Breading says.

Looking at the industry internally, Breading sees insurers capitalizing on the advancements by using virtual reality to train claims adjusters. New adjusters typically learn how to appropriately assess damage in a training facility or warehouse with access to physical sites, but Breading says insurers can now use augmented reality to replace a physical space and improve the adjustment process.

“You can do all of that with virtual reality—and more, because you can continue to change the scenarios and have them walk through different accident sites and damage areas to give them the chance to see and react in a virtual reality mode,” Breading explains.

As insurers continue experimenting with these fast-moving developments, Breading says it’s OK for independent agents to take a back seat approach and simply stay educated about the impact of wearables on coverages, discounts and consumer uses.

“If I were an independent agent, there would be a lot of other things in terms of emerging technologies that I’d be more concerned about that are going to be disruptive to the market,” Breading says. “Telematics and the move toward semi-autonomous and driverless vehicles is going to change everything, and it’s a big impact. But they should just be trying to make sure they keep abreast of generally what’s happening in that space.”

Morgan Smith served as IA assistant editor.