IoT devices are set to change the home insurance landscape
The next wave of home insurance is around the corner – and it’s a lot smarter than before.
The insurance industry is focused on ecosystems. Insurers everywhere are pursuing partnerships and offerings that further embed them in new and evolving ecosystems. Home insurance is no exception. Technological advancements have led to a wave of new technologies that can create a connected home. The home has now become a “smart ecosystem” that is ripe for innovation on the part of insurers.
A home’s level of “connected-ness” can vary, but fundamentally it means that there are a number of devices in the home that are measuring, reporting, and acting upon data. “The ‘smart’ in smart home comes when rules or artificial intelligence (AI) are applied to the devices to initiate specific actions without the need for human intervention.”
Homeowners no longer need to adjust their thermostat when they leave. Nest will take care of that, knowing to turn the heat down when you leave and to reinitiate the system 15 minutes before you arrive home from work. This can save homeowners a fortune on their heating and electricity bill.
There are numerous examples of the new technologies and companies that are transforming the way homes are operated. Alexa and Google Home can aggregate information from devices all over the home, creating optimum efficiency. Companies such as Red Balloon Security can ensure all of the devices in your home are secure. SimpliSafe provides entire home security that is connected to a central device, ready to dispatch police immediately if there is a break in.
With the introduction of new devices that can more accurately monitor a home’s activity, this creates new opportunities for insurers to become a more integral element of a consumer’s life. Traditionally, a customer only speaks with their home insurance company when something has gone wrong, such as filing a claim. Now, providers can utilize smart home technology to develop ways to help, interact, and differentiate themselves form their competitors.
These devices could also upend the risk models that have traditionally informed insurance pricing. Matteo Carbone, director of the IOT Insurance Observatory, said “technology that allows persistent monitoring of risk exposure during the coverage period could potentially enable insurers to price each risk at the most adequate rate.” New propositions could include emergency solutions, tracking and optimization tools, home management platforms, and remote monitoring and assistance. More accurate risk modeling leads to more efficiency for both insurer and customer.
Naturally, younger people are more open to incorporating new technologies into their homes and purchasing smart home insurance. The 18-34 demographic is critical for insurers though, as it is lucrative to sign up new homeowners and create lifelong relationships.
Insurers need to demonstrate the value they can deliver for these customers through smart home insurance. The value of a smart home lies in the data that is produced. With real time data on the entire home ecosystem, homeowners and insurers can collaborate to mitigate losses and create a further sense of security against life’s unpredicted events.
As noted in the IoT Insurance Observatory, insurers are only just beginning to capitalize on the opportunities in the smart home space: “Understanding detailed customer needs, providing complimentary or otherwise discounted smart devices, and integrated brick & mortar services for homeowners are only the beginning of the adjacent value provided thus far.”
The home ecosystem is undergoing a major transformation. With this transformation only in its nascent stages, early-moving insurers can leverage the new devices to proactively protect and delight their customers. The home ecosystem can become a continuous, virtuous feedback loop that results in more involved and beneficial relationships between property owners and insurers.
Download the Smart Home Insurance report on the IoT Insurance Observatory