Do you need a ‘nudge’ to live a longer, healthier life (and cut your life insurance premium)?

By Jeff Bernier

Technology is changing our lives. And now it can potentially change your insurance rates. It’s all about the power of the ‘nudge.’

It’s no mystery that behavioral psychology can have a major impact on how we live our lives. I’ve been a longtime admirer and follower of Richard Thaler, a professor and researcher at the University of Chicago who won the Nobel Prize in Economics in 2017. For years, Thaler has focused on and written about the power of human behavior on economic decision-making. (Check out this video on our website to learn how behavioral psychology can directly affect your wealth.) A classic read for behavioral finance geeks like me, Thaler’s book Nudge illustrates the idea that we humans can sometimes be “lazy, uninformed, and unmotivated,” and that to reach our goals, we need to create personal rewards—or ‘nudges’—to get us to take the best possible actions. I’m certainly no exception.

I’ve been athletic since I was a kid, and I have always preferred a ball game to any other type of workout. But as I got older, I learned that life happens, and once I was out of college, playing football simply wasn’t an option to stay fit. I hated the whole idea of running, but I took it up out of necessity, and quickly learned to love it. It helped me stay relatively fit and healthy for years—no nudge required. But then I kept aging! About five years ago, my knees started complaining about years of hitting the pavement. Running was no longer an option, so about 6 weeks ago I bought a good road bike and made the switch to a new form of exercise. Once again, I’m feeling fit and healthy, but I can still use a good nudge to get me out on the road.

I stumbled across the perfect ‘nudge’ when I was searching for a new life insurance policy and learned about John Hancock’s new Vitality program. The Vitality program offered me the option to reduce my life insurance premiums by committing to a healthy lifestyle. The catch: I’d have to agree to wear a fitness tracker to report my workouts and give my insurance carrier access to my fitness data.

For me, saying yes was a no-brainer. I already love how the cycling community has embraced gamification—using technology to reward me (and yes, nudge me!) for working out. Along with other cyclists, I use Strava, a social media tracking app, to share my rides and even get high-fives from other riders, all via my iPhone. I also like the idea of tracking my heart rate and calories burned during each ride using a fitness-tracking device. So if I’m tracking my workouts anyway, why not share that information with my life insurance provider to get a better rate?

There are definitely pros and cons. When John Hancock announced they would sell interactive policies that track fitness and health data through wearable devices and smartphones, some privacy and consumer advocates sounded the alarm bells, saying that the approach would unfairly penalize policyholders who choose not to participate. And while I understand the concern (I, too, am opposed to anything that feels like a nanny state; I don’t want my every move to be regulated and controlled by anyone!), I think this is could be a good ‘nudge’ toward better health outcomes. Plus, consumers do have a choice about how they participate in the program. For instance, I chose a policy that has a guaranteed premium, meaning that it won’t rise depending on my activity level, but I can earn premium reductions if I reach certain activity goals. The other option: a policy with a premium that fluctuates according to your activity level. I chose the more conservative and predictable option.

To sweeten the deal, my policy included a 40% discount off the price of a new Garmin fitness tracker. (The program also supports the FitBit and the Apple Watch.) My new Garmin watch is a great way to help me keep my own fitness goals on track, connect with my new cycling buddies on the Strava app, and yes, even nudge down the cost of my life insurance. It seems like a win any way I look at it.

I decided that the Vitality program is the right insurance policy for me, but is it right for you? The best way to answer that question is through a comprehensive insurance needs analysis. At TandemGrowth, we include this analysis as part of our wealth management process. We assess our client’s financial situation to determine if they have the right type and amount of coverage. Then, working with insurance professionals, we explore the many available options to identify an appropriate product to address their specific needs. As part of our culture of collaboration, we work with a number of highly qualified professionals who have access to top-rated carriers, including those that offer a wide variety of solutions to meet almost any need. (Note that as fee-only advisors, we do not sell any insurance products or receive any sort of compensation for the products we recommend.) Choosing the right policy for you is a very personal choice and a vital part of your overall wealth management plan.

In the October episode of the Money & Meaning Show, I’ll be diving deeper into the topic of life insurance, including how to determine what type of insurance is best for you, how much coverage you need, and how to identify the most appropriate provider. I hope you can join me. Until then, I urge you to find the right ‘nudge’ to help you live a longer, happier, and healthier life.