CNBC reports that Apple has recently held discussions with insurance company Aetna about providing Apple Watches on a subsidized basis to at least some of its 23 million customers. Aetna already has a program to provide Apple Watches to its employees, and both Apple and Fitbit have been talking to a variety of healthcare companies about partnerships to get wider distribution of their devices. This is the first real sign that Apple might do a deal which would be much larger in scale than anything that’s been contemplated so far. For context, Apple has likely sold just over 30 million Watches in total so far, so getting Watches to even half of Aetna’s members would be a massive boost to the business. Such a deal would likely see Apple supplying Watches at less than the usual retail price, both as a bulk discount and because the cost of acquisition would be much lower than a typical retail purchase, while Aetna would subsidize the remaining cost for its members on the basis that fitness trackers tend to improve health and fitness and therefore lower the odds of a medial issue that requires insurance coverage. The rationale there would be much the same as for insurers providing discounted gym memberships. Partnerships like this with medical providers probably have more potential than anything else to boost the addressable market for fitness-centric wearables, including the Apple Watch, because they substantially lower the cost of entry for consumers while providing strong incentives to make use of the devices. There’s obviously no guarantee any of this gets done, but it’s the kind of thing I’m sure we’ll see at least on a small scale in the near future, whether with Aetna and Apple or other pairings.
Pay-as-you-drive insurance isn’t a brand new concept – indeed, I remember a colleague writing a report on this about five years ago when I was at Ovum. The basic concept is that the insurance company finds a way to measure actual driving behavior and then offers lower rates to those drivers who drive most safely. There are a number of pilots and active programs underway already, and this Tesla program just takes it a step further by focusing on drivers who turn on the Autopilot feature. Outside of this program, Root measures actual driving behavior through an app, but with Autopilot-enabled Teslas, there’s apparently no such hurdle to overcome. That’s great validation for Tesla (especially given the recent worries over its latest software), and also for autonomous driving technology as a whole – a key argument made by essentially all of its proponents is that it will be safer than human drivers. I’ll be curious to see if this program eventually gets expanded to cover other ADAS systems (since Autopilot is technically ADAS rather than autonomous technology), and whether Root’s data backs up Tesla’s claims about safety over time.