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September 2014

The iPhone 6 and Apple Watch are groundbreaking new technologies with significant implications for the insurance industry.

They look set to popularize new payment systems and wearable technologies that will change the way in which users interact with the world around them, generating invaluable insights into human behaviour. However, risk experts at Zurich Insurance Group note that, as ever, new technology brings with it new risks.

The launch of the iPhone 6 was coupled with news of a partnership between Apple and payment companies Visa Inc., MasterCard Inc. and American Express Co. This deal means that users of the new phone will be able to pay for goods and services with a touch of their finger on a fingerprint reader on the device.

“This new payment technology will be great news for consumers and businesses alike. But it will require an even greater focus on fraud risk by all involved. Hackers will inevitably attempt to hijack the devices to make unauthorized payments or even access accounts,” says Dr. Benno Keller, Head of Research and Policy Development at Zurich Insurance Group.

“At the same time, every other smart phone manufacturer in the world will be rushing to bring their own payment system to market. Failure to follow Apple’s example means companies risk being left behind, a delay of six to 12 months is unacceptable. These systems will therefore likely be introduced under great time pressure, so a prudent approach to security will be a top priority to avoid the risk of system vulnerabilities.”


Rich data

Insurers are also keeping a close eye on wearable technologies like the Apple Watch.

“The Apple Watch is really the canary in the coal mine for wearable technology,” says Dr. Keller. “If the world’s strongest electronics brand can’t persuade people to adopt these devices, then nobody can. If they do become endemic, Apple Watches and similar products will open a whole new set of challenges and opportunities for insurers.”

In the future, these devices will allow users to monitor their heart rate and other health metrics in real time, track their movement through GPS and pedometers, interact with the world around them through information services or user-defined target marketing, and a host of other services. “This interaction with technology will inevitably generate an enormous of data about the wearer’s choices and lifestyle which insurers can use to refine their understanding of the risks faced by their customers. It would make it easier to predict outcomes and even push solutions to challenges that have yet to occur.”

The challenge is that a lot of this data will be gathered and stored remotely in The Cloud, which means that it could potentially be accessed by cyber-criminals. For example, it is thought that hackers recently downloaded personal photographs of celebrities, including Jennifer Lawrence, from Apple’s iCloud.


Benefits as well as risks

Though risks are always there, the reality is that they are outweighed by the benefits of such technology. Wearable technology will provide a new way to interact with the world around us. It will tell us where to go for the best food or the best party, allow us to share experiences instantly, help us manage our health and our lives, and will almost certainly be designed to make us look good while we do it.

Payment systems over mobile phones will be a huge convenience for many of us and may one day free us all from the burden of carrying wallets, cash and cards, which will also provide a degree of security from petty theft.

Nevertheless, it’s important that we assess the associated risks properly. That way, we can put the right protections in place and reap the benefits that innovations like the iPhone 6 and Apple Watch will surely bring.

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