The adoption of health-tracking technology and increasingly advanced data analytics in the life insurance industry is paving the way for a much more sophisticated approach to underwriting.

However, with the collection and sharing of health-related data flagged by federal privacy regulators as a key privacy concern for Canadians, insurance companies will need to be cautious in how they proceed with these new tactics.

Although life insurers have long collected a variety of health information as part of the underwriting process, recent advancements, such as the use of wearable technology to capture health information of policyholders by some life insurers around the world, are raising new questions about both the type of information being collected by insurers and the privacy implications.

“A lot of this is not really new because as an industry, we’ve been dealing with information about people – medical information, for example – for a very long time,” says Frank Zinatelli, vice president and general counsel at the Canadian Life and Health Insurance Association Inc. in Toronto. “Now, with more and more information becoming available, and people sharing it for different purposes, the questions become: ‘What does that mean? Are there any privacy issues?'”

The Office of the Privacy Commissioner of Canada (OPC) has identified privacy issues surrounding this technology. The OPC’s latest annual report identifies the collection and use of health information for commercial purposes as a key privacy concern because wearable technology and other connected devices are allowing body-related information to be collected and shared now more than ever.

According to the report: “How this information is used or disclosed could affect our lives in a variety of ways, from our future insurability or employability to our personal relationships.”

A program called Vitality, recently launched by Toronto-based Manulife Financial Corp., is one example of how insurers are adopting this kind of technology. Under Manulife’s program, launched in partnership with Chicago-based wellness program provider Vitality Group Inc., policyholders receive a fitness-tracking device that they can use to demonstrate that they’re engaging in physical activity – which, in turn, can help them earn points to qualify for a discount on insurance premiums.

Similar programs have been introduced by insurance companies in other countries, and the concept is likely to be adopted by more insurers, says Janice Deganis, national leader, insurance, at Ernst & Young LLP (E&Y) in Kitchener, Ont. The technology enables insurers to learn more about their policyholders and correlate premiums with ongoing measures of policyholders’ health, while also motivating those policyholders to improve their health, she says: “Having that information [about] the physical activity or the health of [policyholders] can help to improve underwriting.”

Under Manulife’s Vitality program, data gathered from the fitness-tracking devices is managed by Vitality Group. Manulife receives information about the number of points policyholders have earned under the program, but not specific details of the activities that led to those points.

However, research from E&Y suggests that as life insurers adopt wearable technology more widely, companies could find ways of capturing valuable data from this technology.

The more information that an insurer has about its policyholders and applicants, the better positioned it will be to assess the risk associated with each individual, says Lorne Marr, director of new business development at Markham, Ont.-based LSM Insurance Services Ltd. In addition, having more data to analyze can help insurers identify broader trends and risk factors within large groups of clients.

“I would think [insurers] would use the information to improve how they’re doing their underwriting,” Marr says, “and make their underwriting more profitable.”

As insurers collect more information, however, they must ensure clients have provided proper consent, says Roobi Alam, senior manager, advisory services, at E&Y in Toronto.

“If [an insurance company] is collecting information from [a wearable] device,” she says, “before it starts doing that, it needs to inform the individual – let him or her know this is what’s going to be collected, this is how it’s going to be used and [these are the] safeguards in place.”

Earlier this year, the OPC conducted a sweep to assess the way privacy is handled around “Internet of Things” – specifically, devices such as fitness trackers that have Internet connectivity, which enables them to send and receive data. The OPC found that companies offering these devices generally do a poor job of explaining how the information collected is stored and safeguarded, or how users can delete their personal data. That result suggests regulators will be paying closer attention to the type of information being gathered by wearable technology, the way the information is being used and how both of that is communicated to consumers.

A key challenge will be striking the appropriate balance between sufficient disclosure on privacy without bombarding clients with fine print, Zinatelli says.

“I think we’re going to have to keep tweaking that [consent process] to make sure that it continues to be meaningful and appropriate in the context of these new technologies,” he says. “Are there going to be new challenges? Probably. But the insurance industry is up to that.”


The life insurance industry may face new restrictions on collecting genetic test results as part of the underwriting process because of privacy concerns.

As genetic testing becomes more popular as a way for individuals to determine the health risks to which they may be susceptible, the Office of the Privacy Commissioner of Canada (OPC) is concerned about the results of these tests being used by insurers and other organizations. The OPC’s 2015-16 annual report states: “The collection and use of such information could lead to a variety of risks, including discrimination or the denial of services on the basis of genetic predisposition.”

Bill S-201: An Act to Prohibit and Prevent Genetic Discrimination, which was passed in the Senate in April 2016 and now is being considered by the House of Commons, would prohibit the collection of genetic test results as a requirement for providing goods or services, such as an insurance policy, and would create a requirement for written consent from individuals who choose to provide such information.

Under Canadian Life and Health Insurance Association Inc. (CLHIA) rules, life insurers do not require genetic testing to be done in order to apply for life or health insurance. However, in cases in which genetic testing has been undertaken by an individual who applies for insurance, the insurer has the ability to ask for the results during underwriting.

Without access to that data, insurers wouldn’t be able to assess properly the risk associated with applicants who have undergone testing that reveals a predisposition to various diseases, says Frank Zinatelli, vice president and general counsel with the CLHIA. If the bill is passed, he says, the result would be less predictable claims experiences and, ultimately, higher prices for all consumers: “If we are charging too little to all of those people, that means that when all of those claims come in, we won’t have enough money to pay them. We’re going to have to raise the price for other folks that are lower-risk.”

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