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Business technical: Wearable devices at work

Various products aim to promote safety on the job

Business technical: Wearable devices at work

In the form of vests, belt clips and more, wearable safety devices intended to mitigate occupational injuries and deaths could transform the workers compensation industry sooner than expected after buy-in from one of the world's largest insurers.

American International Group Inc. this month announced its “strategic investment” in New York-based Human Condition Safety, which is among the startups piloting sensor technology said to identify potential injuries and reduce the frequency and severity of workers comp claims.

While companies such as BP P.L.C. and Target Corp. already use activity and sleep tracking devices to promote healthy habits among workers, experts say more employers are showing an interest in using wearables to prevent occupational injuries. AIG's deal, the terms of which were not disclosed, will only accelerate that interest, they add.

AIG's investment in Human Condition Safety shows “this is something that is emerging and is real, and insurers are seeing there will be potential benefits,” said Christopher Flatt, managing director and leader of Marsh L.L.C.'s Workers' Compensation Center of Excellence in New York.

Workers comp is a data-rich, compulsory line of business that “lends itself to innovation,” Mr. Flatt said. “From our perspective … if we can differentiate (a client's) risk profile by saying they're using this particular technology, perhaps we can achieve better market pricing from (insurers) or just improve terms.”

In the future, AIG could promote wearable safety devices the way Allstate Insurance Co. promotes its Drivewise device, which drivers plug into their vehicles and earn rewards for safe driving behaviors such as avoiding high speeds and hard stops, said Paul Braun, managing director of casualty claims at Aon Global Risk Consulting in Los Angeles.

Lex Baugh, president of global casualty for AIG, said in a video on the company's website that “there's a real benefit here, both from a financial standpoint in terms of reducing the cost of risk and improving the quality of someone's work experience.”

Historically, startups have approached an industry with “disruptive innovation” and made established organizations a little uncomfortable, but AIG's investment is a sign that the “script is being flipped,” said Jarrod Magan, Memphis, Tennessee-based vice president of client technology services for Sedgwick Claims Management Services Inc. “Established organizations understand the need to continue to evolve.”

Though sources said they're not aware of other partnerships between large insurance companies and wearable technology startups, deals are inevitable.

“It just makes a lot of sense,” said Haytham Elhawary, CEO of Kinetic, a New York-based company that created a wearable safety device for industrial workers. “Right now the data insurance companies have is mostly after the fact — it's once a claim has happened, once an injury has happened. (A wearable safety device) gives you data about risk, so before an injury has happened. The next logical step is to gather this type of data.”

Similar to wearable devices by Human Condition Safety and other firms, sensors in Kinetic's belt-mounted device measure workers' movements, alerting employees and employers when “high-risk motions,” such as improper lifting, are detected, Mr. Elhawary said.

Crane Worldwide Logistics L.L.C., which piloted the product at a distribution center last summer, was able to measure the number of high-risk lifts performed per day — an average of 140 — and identify the riskiest time of day — before lunch and an hour before the end of a shift — said Mr. Elhawary.

With additional training and real-time feedback, the Houston-based transportation and logistics services provider saw an 84% reduction in the number of high-risk lifts performed per shift after two weeks, Mr. Elhawary added.

Beyond the ability to correct unsafe behaviors, experts say there's a lot of interest in using wearables to monitor remote workers and mitigate fraudulent workers comp claims.

There is a concern among some workers that employers could start using the data captured by wearable devices against them, Mr. Magan said. He added that while most companies employ the carrot approach when using wearables in conjunction with employee wellness programs, they could shift to the stick approach because of financial reasons, for example.

If that were to happen in the safety arena, tracked unsafe behaviors could lead to increased insurance premiums or termination, he said.

The biggest concern among workers, however, has to do with privacy. Like any details about occupational injuries or medical treatment, it's “paramount that the data is protected in a way that it can't be hacked or leaked,” Mr. Flatt said.

Moreover, a number of questions need to be answered before wearable safety devices become more widespread, Anand Rao, Boston-based partner in the insurance advisory practice at PricewaterhouseCoopers L.L.P., said. For example, would device manufacturers have access to the data collected? And who gives permission — the employer or the employee — to access the data?

Mr. Elhawary said workers using Kinetic's belt-mounted device “are curious about what data we're collecting” but concerns fade when they learn it's about the way they move — not heart rate, location or other “sensitive” information.

Sources said they expect to see more widespread adoption of wearable safety devices in the next two years. “This is happening fast,” Mr. Flatt said.