This past week John Hancock made a product decision that was, in my opinion, quite Orwellian.

This past week John Hancock made a product decision that was, in my opinion, quite Orwellian.

The term “Orwellian” is reference to a George Orwell novel titled Nineteen Eighty-Four or “1984.” The novel is a dystopian story where the author describes a society living under constant surveillance. The slogan "Big brother is watching you" constantly reminds the citizens of the ever-present watchful eye of the surveillance.

When I learned of John Hancock’s recent announcement, it put a slight “Big Brother” chill down my spine.

John Hancock announced it will stop underwriting traditional life insurance and instead sell only high-tech interactive policies. What is an interactive life insurance policy? A policy that tracks fitness and health data through wearable devices, like a Fitbit or a smartphone, and underwrites that policy based on the data it collects. While Hancock’s move may not be an act of constant surveillance, the insurer is clearly watching its policy holders very closely.

John Hancock is one of the oldest and largest life insurers in the United States. If they are making the jump to underwrite policies in this way, others will follow suit. While this process is nascent in the United States, interactive life insurance is already well established in other parts of the world.

Many of us think our high-tech wearable devices are cool. However, we may want to think twice about the data that’s being collected about us. While a device that watches our step count, blood pressure and heart rate may help us manage our health, that same device may share data that prohibits us from getting an essential insurance.

New ideas and products brought to market often fail. The technology products graveyard is peppered with products that never survived. Like tech companies, insurance companies have product failures. Cutting-edge products often die embarrassing deaths, but they often lay the foundation for better ideas that later catch on. Will interactive life insurance policies survive? Only time will tell.

With interactive life insurance, policyholders get discounts for hitting exercise metrics or by logging their workouts and/or healthy food consumption via an app on their smart phone. Policyholders get incentives to adopt healthier lifestyles. All of the insured’s data is verified, tracked and stored via wearable devices and/or smart phones.

What’s in it for insurers? In theory, they’ll have better data for underwriting. They’ll also collect more premiums and prolong death claims because healthy customers should live longer.

It’s way too early to determine if this strategy equates to paying fewer death claims for any insurer’s adopting interactive life insurance underwriting. John Hancock’s close partner for interactive life insurance, the Vitality Group, has been collecting data for the interactive life insurance model. Their data suggests interactive life insurance policyholders could live 13 to 21 years longer than the rest of the insured population. Prolonging death claims for 13 plus years equates big profits for a “Big Brother” insurer.

Is this Orwellian? Consumer groups have certainly raised the red flags. Will insurers use data to select the most profitable customers? Will they hike rates on those who may not be as healthy or choose not to participate in the data sharing? In my opinion, this is just the start of interactive underwriting process. Health, disability, long-term care insurers will all follow suit.

Between social media and wearable devices, we may be providing “Big Brother” with data that we may one day regret that we shared.

Big data is disrupting every industry. I recently saw Billy Beane, the manager of the Oakland Athletics. He also was the main character in the book and movie "Money Ball." Data drives all Major League Baseball decisions now. The front office of every Major League Baseball team is staffed with techies with PhDs. As the Red Sox head-in to the post season, let’s celebrate one of the winningest regular seasons in history. If you plan on watching the play-off games while dining on hot dogs, nachos, pizza, popcorn and cold beer, keep the Fitbit and smartphone turned off. “Big Brother” will be watching.

 

Bill Harris is a certified financial planner practitioner. He is the chairman of the Financial Planning Association of Massachusetts and an Ed Slott Elite IRA Advisor. He is a co-founder and principal of WH Cornerstone Investments in Duxbury and Kingston, a firm dedicated to empowering people to see their future as greater than their past. Bill is passionate about empowering widows with their financial future, and his award-winning email newsletter offers helpful advice and articles for widows looking to rebuild their financial and personal life. He can be reached at www.whcornerstone.com, p: 888-797-9009, Twitter @whcornerstone or @billmharris.