The life insurance industry is in decline. Since the mid-1980s, sales have fallen by 45 percent across the industry. Thirty percent of American households today don’t even have life insurance. The numbers are even lower when you look at Millennials. Many life insurers are wondering how to attract a new generation of customers. The answer might lie in a new generation of tech: wearable biometric trackers.

What Are Wearables?

Wearable biometric trackers or “wearables” have come a long way since basic step-counting pedometers. A bevy of electromechanical sensors support these devices. Among them: accelerometers, magnetometers, barometers, and gyroscopes.

These sensors work together to analyze many aspects of movement. Wearables can track the direction, speed, and intensity of your movements. They also can calculate calories burned, your heart rate, and even your sleep cycles.

Popular brands include Fitbit, Garmin, Samsung, or the Apple watch, but there are literally hundreds of different models ranging in price from $20 to $200. Twenty percent of Americans under the age of 65 report using some kind of fitness tracker, and the market is growing.

Interest in wearable fitness trackers has been consumer-driven so far. But the insurance industry is paying attention.

How Does Insurance Use Wearables Now?

It started with corporate wellness programs. Companies have a vested interest in keeping employees healthy. Healthy, active employees are more focused, productive, and take fewer sick days. Corporate wellness programs can also keep morale high and increase camaraderie. And healthier employees cost employers less in company-sponsored health insurance premiums.

Corporate wellness comes in many forms. It can mean a company-sponsored gym membership, nutritional counseling, or biometric screening. It can also mean distributing fitness trackers to employees. These fitness trackers encourage employees to keep active. The use is rarely mandatory and employees aren’t penalized for poor performance.

Health insurance companies have partnered with private companies to offer financial incentives for using trackers. One major partnership is between UnitedHealthcare and Qualcomm Incorporated. Employees can earn up to $1,460 annually by meeting step goals. Anthem reduced prices for the tech company Appirio by $280,000 when it demonstrated health savings through employee Fitbit usage. Corporate wellness and company-sponsored health programs often work together on incentive programs. It’s no surprise they’re starting to work with wearables.

The first American life insurance company recently entered the wearables arena. John Hancock partnered with the global wellness company Vitality to offer customers discounts of up to 15 percent on their life insurance premiums. They earn “Vitality Points” by tracking their movement and maintaining other aspects of a healthy lifestyle.

Wearables are by no means ubiquitous in health insurance or corporate wellness. They couldn’t even be described as common. But biometric trackers might become a staple of the life insurance industry. Wearables won’t be used to adjust premiums over the length of a policy. Instead, they might revolutionize the process of buying a policy in the first place.

Role of Wearables in Life Insurance: Not What You’d Think

Health insurance and corporate wellness programs use wearables to adjust rates or reward members after issuing policies. That’s also how John Hancock’s new program works. But that’s probably not the way this technology will be used for life insurance in the future.

Founder of Wearable Tech Insider Dan Rosenbaum doesn’t think it makes sense to base life insurance policies on long-term biometric data. “If you’re signing up for a life insurance policy that requires you to wear a fitness tracker, that’s a 20- or 30-year commitment,” says Rosenbaum. “And we don’t even know what this technology is going to look like in 20 or 30 years.”

One study from Endeavour Partners found that over a third of people who own a fitness tracker stop using it after only a few months. All sorts of things can trigger “tracker fatigue.” People find fitness trackers unsightly, inconvenient, or easy to lose and forget. “People have trouble committing to this stuff for more than six months at a time,” says Rosenbaum. “Doing it for 20 or 30 years would highly unusual.”

Dr. Rob Lund, vice president and medical director of Munich Re’s Munich America Reassurance Company, says life insurance companies are more interested in using biometric trackers to streamline the underwriting process.

“The way we’re looking at it isn’t necessarily about tracking the levels of an individual’s physical activity after they’ve been issued insurance,” he says. “We’re looking more at a device to assess their fitness at the time of issuance…. The industry is moving toward streamlined underwriting and instantaneous results. That’s where everybody wants to go. How this information can be best integrating into this system remains to be seen but I think there will be a place for it. There are definite advantages to this sort of biometric data.”

Traditionally, Lund says, the underwriting process takes as long as 30 days. It usually includes the collection of blood and urine samples. These samples can verify questionnaire results and help underwriters assess an applicant’s mortality risk. They also feel invasive to many potential customers.

There are “no-exam” policies, but these are often more expensive. Insurers prefer to have hard data they can trust when issuing policies. Blood and urine rarely lie. Munich Re believes wearables could help eliminate invasive or time-consuming aspects of underwriting. Data from a wearable fitness tracker might provide information they could use instead of blood or urine. Lund estimates a life insurance candidate could easily pick up a tracker from an underwriter and wear it for several days before getting a policy. This seems easier and more palatable for consumers.

“One thing we’ve been very focused on is this notion of improving the customer experience with streamlined underwriting,” says Phil Murphy, second VP of Munich America Reassure. Murphy leads its integrated underwriting team. His job is finding tech that might improve the underwriting process.

“One thing that’s a hassle for consumers today is that they need to give blood at urine, at a minimum,” says Murphy. “That’s inconvenient and it adds time. Companies are looking for ways to take blood and urine out of the process and so they’re searching for new types of information that can replace it. That might include wearables.”

Potential Problems with Wearable Use

Pedometers are arguably as old as Da Vinci. But the wearable biometric trackers we’re using today are relatively new. There are many ways in which the technology will need to improve before it becomes a standard part of any policy. There are also privacy concerns that will need to be addressed.

Are They Accurate Enough?

If you wear five different trackers on your arm for a day, you’re going to get five different step counts. And it turns out that wrist-worn trackers, which are by far the most popular choice, aren’t nearly as accurate as trackers worn at the hip. The media has criticized the accuracy of everything from the calorie counts to the sleep cycles. The only way these trackers could be useful to underwriters is if they get data they can count on.

The first thing that needs to change is the target consumer. Most wearable fitness trackers were designed for young, athletic users. “The way this data is accessed and processed is not optimal for middle-aged, rather sedentary insurance applicants,” says Dr. Lund. “Some modifications of the technology would be necessary for producing good data for insurance admissions.”

The calibrations on these trackers are delicate. The various sensors inside a tracker aren’t sending all the data all the time. They are set to consider a certain range of data important and worth reporting to the device’s server.

“If you set it too high, you acquire data at too many times a second and you get background noise,” says Lund. “If you set it too low, you miss movement. It’s very difficult to get the right range.”

And the fitness tracker audience is very different from your typical insurance applicant. “Right now,” says Lund, “most sensors are calibrated to young, athletic people. Middle-aged insurance applicants are relatively sedentary. Their general level of movement activity is less than some 25-year-old training for a triathlon.

“Young, active people drove the development of these devices and a lot of their settings aren’t optimum for determining the kind of movement we’d want to look at. They’re not sensitive when it comes to picking up movement that is slow, or picking up movement in the upper extremities. They’re very good at tracking walking, but not so good at detecting energy expenditure from sweeping or vacuuming.”

Yet wearables are still a step forward that Lund’s eager to take. Underwriters often use questionnaires to assess physical fitness. These devices are superior to a questionnaire, and the tech is constantly improving.

Rosenbaum did a test of his own at a wearables conference one year. He wore several different fitness trackers while walking around the event all day. At the end of the day, he says, there was about a 20 percent difference between the step counts of the different trackers. The next year he did the same thing. There was an average five percent difference. “That might not be precise enough to base medical decisions on,” he says, “but it’s close enough to be considered useful data. The technology is improving.”

Data Security Concerns

People are also concerned about the security issues associated with wearable biometric trackers. Data is sent from the device to a central server where it’s analyzed. During this transmission the data is vulnerable to interception. This includes a user’s location, login information, and vitals.

A recent study of eight leading tracker brands found that all devices except the Apple Watch were easily hacked. The researchers could intercept data transmissions on their way to the server. They also found that all devices transmit a constant, distinct Bluetooth identifier. This Bluetooth identifier contains location data that all companies but Apple failed to disguise.

Everyone is vulnerable when data is leaky. The people who might want access to a fitness tracker’s data aren’t necessarily faceless criminals acting independently. Yes, some third-party “hacker” might take a user’s data for personal gain. So might a private company who wants to profile customers and keep tabs on them. This could even include the tracker’s manufacturer or retailer. There is fear that employers might use trackers from corporate wellness plans to monitor employees. There’s also fear a user could hack their own account. They may want to tamper with their stats to achieve wellness incentives.

Murphy believes these security issues will have to be addressed before fitness trackers can be incorporated into underwriting in a major way.

“If we’re not as an industry responsible and conscientious about how we’re approaching all this, we run the risk of throwing it all away,” says Murphy. “The data security issue is, in my opinion, table stakes. We have to be able to protect all of that.”

How Wearables Might Attract Millennials to Life Insurance

Millennials are more comfortable with sharing data than any other generation. Information is often seen as the price of admission for better, more accurate service. Sharing a GPS location on a smartphone, for example, means a better experience of popular apps like Google Maps, Uber, Yelp, or Snapchat. Eighty-two percent of Millennials use Facebook, which is essentially a shared web biography. Targeted ads stopped surprising anyone a long time ago.

What does this mean for wearable tech? Millennials are less hesitant to share biometric data and might be receptive to policies that use that kind of data. Locations and statistics are exactly the kind of information Millennials give willingly. Blood and urine seem archaic.

Consider the following statistics based on various polls:

Could Wearable Technology Appeal to Millennials?

“How do you kind of engage the younger generation and make your product relevant to them?” asks Murphy. It could be that a faster, streamlined underwriting process is exactly what it takes to reinvigorate the life insurance industry and attract the next generation of policyholders.

Life insurance is a low priority for young people. Sixty percent of Millennials consider their cell phone, Internet, and cable payments higher priorities than purchasing life insurance. Forty-nine percent of those 65 and older say the same thing. Millennials are also delaying marriage and children. Family is the biggest incentive to get life insurance. College debt also plays a role in de-prioritizing long-term financial commitments.

If fitness trackers and wearable tech become part of the underwriting process it might change the game for life insurance, hopefully by adding younger players.