Despite the benefits associated with exercise, less than 5% of American adults take part in at least 30 minutes of physical activity per day. But for those who do exercise and exhibit healthy habits, life insurance companies John Hancock and Health I.Q. are looking to offer discounts and rewards. These life insurance fitness and health programs represent an opportunity for insurance companies to market to the 34% of millennials who believe that most people need life insurance but don't have a policy themselves. While John Hancock and Health I.Q.'s programs have different features, both provide discounts for taking part in physical activities and tracking workouts with a fitness device.
The Link Between Millennials and Fitness Presents an Opportunity for Insurers
The disconnect between millennials and life insurance presents a huge financial opportunity for insurers. LIMRA and Life Happens, a nonprofit formed by seven insurance organizations, conducted a study that revealed 52% of millennials have life insurance, but 86% said that most people need it. This leaves a gap of at least 34% of millennials who don't have life insurance but believe it's important. Considering the current population of millennials in the U.S., there's potential to tap into 28.3 million new life insurance policies.
Michael Doughty, president of John Hancock, says that the hope is the Vitality Program, which offers fitness-based discounts, reinvigorates life insurance sales. According to data from the Board of Governors of the Federal Reserve System, the number of households that have a life insurance policy has been in a decline over the past 30 years. In 1989, the percentage of households with life insurance was 77%, while the most recent figure has fallen to 60%. It stands to reason that even the best life insurance companies are looking for a way to reinvent themselves and reverse the downward trend. One such opportunity is to focus on millennials, who have a track record for their high spending on fitness.
Millennials View Health Differently Than Older Generations
Health-related life insurance discounts come at a time when fitness is becoming a main focal point for many Americans, especially millennials. According to a survey conducted by Aetna, millennials have a different view of what it means to be healthy when compared to previous generations. Over 40% of Gen X and Baby Boomers define being healthy as not being sick, compared to just 29% of millennials who share the same thought. A significantly higher percentage of millennials define being healthy as exercising and eating right compared to other generations. Life insurance discounts, like those offered through John Hancock and Health I.Q., have the potential to attract millennials by conforming policies to focus on active health rather than a static snapshot at the time people apply for coverage.
The Impact of Health and Fitness-Based Discount Programs
John Hancock's Vitality Program is the first of its kind in the country, but prospective policyholders can also achieve discounts through Health I.Q., which functions as an insurance broker. It remains to be seen whether these fitness programs can lure millennials and whether they will prompt more insurance companies to follow suit with similar programs. Despite this, these programs are beneficial as customers can take advantage of discounted life insurance rates.
John Hancock's Vitality Program: If you have auto insurance, there is a good chance that you've been offered a discount by using an app to track your driving behaviors. The idea behind John Hancock's Vitality Program is similar. However, this program uses a fitness device, like a Fitbit, to track your physical activity. Policyholders who meet certain health-related goals are awarded with Vitality Points. Points can be earned by exercising, getting annual health screenings, receiving a flu shot and more. The points are accumulated to earn status, which earns its users life insurance discounts of up to 15% of the total cost of a policy and other rewards.
Health I.Q.: Health I.Q. is an insurance broker that developed a proprietary health quiz that evaluates how much a person knows about general health. The company discovered a relationship between scores on its health quiz and mortality rates and thus entered into partnerships with life insurance companies, like SBLI and Ameritas, to offer discounts. Based on your score on the health quiz, Health I.Q. offers a life insurance discount of up to 4%. Users who can verify their fitness by submitting data collected by their smartphones can qualify for another discount of up to 4%. Additional savings of up to 25% can be earned from special credits that are awarded to you based on your lifestyle.
The programs have attracted criticism from industry experts who are concerned about data privacy. The fear is that companies will use these programs as a way to deny insurance coverage to people who fail to stay active. John Hancock mitigates data privacy concerns by allowing policyholders to choose which data to submit and opting to not sell consumer data. However, John Hancock shares the data with entities that help administer the program, meaning that a data breach could impact policyholders who submit data for discounts. Health I.Q. seems largely unaffected by the concerns, as they haven't stopped the company from receiving more than $81 million in funding.
Fitness and the Cost of Life Insurance
Even without discount programs, fitness plays a large role in the cost of life insurance. Weight is one of the two metrics used to calculate a person's body mass index (BMI), which is then used by insurance companies to determine a person's insurability and life insurance rates. We gathered quotes for a group of 35-year-old nonsmokers using each gender. The quotes come from Ameritas Life Insurance and are based on a 20-year term policy with a coverage of $500,000. We found that a 5-foot, 9-inch-tall man who weighs just 10 pounds more than the national average of 196 pounds can expect to pay $355 more for life insurance per year. A 5-foot, 3-inch-tall woman who weighs just 10 pounds more than the national average of 169 pounds can expect to pay $245 more for life insurance per year.
Weight (in pounds)
Annual Life Insurance Rate
While your BMI greatly impacts your life insurance rates, it could also outright disqualify you from coverage with some insurance companies. For instance, Allstate generally denies coverage to someone who has a BMI that falls outside the range of 17.4 to 48.9. Some insurance companies are more conservative about who they underwrite policies to. For example, Pacific Life generally doesn't offer coverage to those with a BMI over 35.
Your life insurance cost will be heavily impacted by your body weight, but other fitness factors will also play a role. When you submit an application for life insurance, it's likely that the insurance company will request that you undergo a medical exam. The exam may involve a physical, a urine test and even a blood test. The information gathered from these exams will help gauge your risk to the insurer, which is how your life insurance company determines your rate.