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Wearable fitness trackers have promised to get people moving, active, engaged, and connected. One company thinks they can even help people save for retirement.
Bank of America received a patent for a system that, among other things, would create a personalized retirement score that could be updated with data from a customer’s fitness tracker. As envisioned in the patent application, which was filed in 2015 and granted on Nov. 28, the system would receive health information from users—things like age, medical treatment history, and fitness activities—and update their projected retirement savings needs based on how that information affected their life expectancy.
The system envisioned in the patent application would use health data to estimate a person’s future medical costs and factor that information into an individualized retirement score. It could also send alerts encouraging people to work out or join a fitness center, and it could communicate workout history to a person’s health insurer for a potential adjustment of health premiums.
Companies have long created retirement readiness scores based on individualized information, but fine-tuning those scores with specific health and fitness data is a new concept in the retirement industry, Donn Hess, director of marketing and communications at Lockton Retirement Services, told Bloomberg Law.
Bank of America declined to discuss the patent or any products in development with Bloomberg Law. The bank is one of a growing list of companies seeking to protect innovations through patents. In 2016, Bank of America was granted 279 patents, placing it among the top patent recipients in the country, according to an Intellectual Property Owners Association report.
The existence of a patent isn’t a guarantee that any particular product will come to market.
A great number of U.S. employees are stressed about their financial situation, and they increasingly look to their employers to help them achieve financial security and wellness, according to a 2017 financial wellness study by Prudential.
It’s this need for financial security and wellness that could boost an integrated retirement and fitness tool. “I think this technology can be sold to employers,” Ed Fensholt, director of compliance services at Lockton Cos., told Bloomberg Law. This system may create a new way for financial companies like Bank of America to have a different approach to employees’ financial wellness, Hess said.
There may be privacy issues, Fensholt, who is also a lawyer, said. From a practical standpoint, the only way that something like this will work well is if employees buy into the idea, he said. There will have to be some guarantees in terms of how data will be collected and secured, Fensholt said.
An employer would probably want to have a clear sense of how this product would better serve its employees, taking into consideration the possible data-security risks, Fensholt said.
There is a big difference in what you see in a patent and what you see in the contract, Fensholt added. If this technology is developed to be sold to employers, they will need to look very closely at the contract, especially the data collection and disclosure terms, he said. Employers may bring a “sophisticated eye” to what may happen with all these data, but ultimately the employees will have to affirmatively opt in, Fensholt added.
Researchers have long found a connection between exercise and longer lifespans. The gains can be significant: A 2012 study by the National Institutes of Health found that people who engaged in a low level of leisure-time physical activity added 1.8 years to their lifespan, while people who were even more active gained more than 4 years of life.
Even so, an individual’s lifespan is influenced by many factors other than fitness, Diane Oakley, executive director of the National Institute on Retirement Security in Washington, told Bloomberg Law. Genetics, alcohol consumption, and even driving habits can play a role in how long a person lives, Oakley said. A retirement calculator that overemphasizes fitness level without taking these other factors into account might not get the full picture.
“The one thing that individuals really have no skill and no clue to predict is their longevity,” Oakley said. “Even the actuaries can’t do it on an individual basis. The actuaries can’t go in and say, ‘Here’s your circumstances, we think you’re going to live until this age.’”
Beyond individual health and lifestyle factors that affect lifespan, a person’s financial needs in retirement can depend on things completely outside their control—for example, political decisions affecting programs like Social Security and Medicare, Oakley said.
“It’s a huge challenge getting Americans to save enough for retirement,” Oakley said. “The real challenge with a retirement calculator is, how do you take all this complex data and simplify it so that the average American who only spends a couple of hours a year thinking about how much they should be putting away for retirement gets the message in a valid way.”
Whatever the system’s benefits for employers or individual retirement savers, the collection of fitness and health data could be a big boon for financial companies that offer a diverse menu of products.
Access to this kind of data could allow a company that offers annuity or life insurance products to fine-tune its underwriting process, either individually or in the aggregate, Charles F. Seemann III, an employee benefits litigator and a principal with Jackson Lewis P.C. in New Orleans, told Bloomberg Law.
Underwriting is the process by which insurers assess a particular risk—in the life insurance context, the risk of an early death—and determine how much to charge in premiums to make the risk worth assuming.
“If you go running more than you eat cheeseburgers, you may be rated a preferred risk for premiums, but if you don’t exercise at all, you may get a letter saying your life insurance is being re-rated,” Seemann said. “It would be like your life insurance company figuring out you’d taken up smoking: They’d rate you a different way.”
Given the power of such a rich data set, Seemann cautioned that the system envisioned by Bank of America could end up being much more valuable to a company than to any particular retirement saver.
“The marketing pitch will probably be, ‘We’ll give you a retirement score to help you plan,’ but I suspect what they’re really looking for is data regarding habits or behavior they can aggregate for their use or sell to others,” Seemann said.
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