The impact of health-promoting efforts by older individuals on the design of long-term care insurance: the application of IoT technology

‘Internet of Things’ (IoT) devices provide insurance companies with real-time data about insured assets or individuals for more precise risk assessment and underwriting. This study examines the potential premium discounts in long-term care insurance when health and lifestyle habits are monitored as risk factors by IoT devices. Our findings reveal that while both regular exercise and good sleep quality reduce the probability of long-term care needs, regular health checks do not. We further construct a heath transition model and identify premium discounts based on data collected by IoT technologies. Using actual panel data in Taiwan, our research suggests that individuals aged 55 years old may be eligible for premium discounts of more than 10%, implying that IoT technologies enable insurance companies to provide customised insurance policies and pricing structures tailored to individual risk profiles and behaviour. Our results contribute to the InsurTech design of long-term care insurance products and provide suggestions for insurance companies and financial authorities.