In the first part of this article, we looked at some of the ways insurers are exploring connected home technology to avoid or limit losses. These include using connections to in-home video cameras to perform digital inventories of the home's contents–expediting claims filings and making it easier to remediate losses–and conducting continuous monitoring through connected smoke alarm detectors and water leakage devices to enable quicker response in case of adverse events.
As the connected home concept gains ground, however, we see new opportunities for insurers in areas outside the traditional scope of property and casualty underwriting. Insurers seeking to build customer relationships and establish a lasting competitive advantage through differentiation also should be thinking about new service offerings.
These might include:
- Home content monitoring and replacement–Automated devices can track the age, maintenance records and general condition of major appliances and systems such as HVAC. Customers can receive automated reminders and/or recommendations on maintenance, along with suggestions on replacement purchases.
- Weather notifications–Customers can receive notifications and updates on severe weather conditions via their preferred channel. In addition, they can be given the option to have certain valuable items (such as cars) protected or placed in storage during high-risk events. Insurers themselves can make bulk purchases of replacement items, ranging from carpeting to televisions, to help customers deal with replacement issues in the aftermath of major catastrophes.
- Health monitoring–Through wearable devices, motion detectors and other innovations, insurers can monitor physiological statistics and offer recommendations related to lifestyle improvement, safety and behavior changes.
- Concierge services–Insurers can offer new concierge-type services in areas ranging from scheduling appointments to booking entertainment events.
Next page: Four areas insurers should consider before entering the connected home market
To explore these service offerings, as well as nearer-term prospects such as improved loss mitigation, carriers need to determine the right entry point and the right way to invest. It is also essential to make sure that some key capabilities are in place. Four major areas for consideration include:
1. Data. Insurers need to think about which data points are of most value and which have the highest predictive potential. They should be planning how this data will be obtained, organized, stored and accessed and whether the current organizational capabilities are up to the task of leveraging these new data sources. Another concern is whether this new data will overwhelm existing business intelligence solutions and if new analytics will be required.
2. Product integration. Once data issues are addressed, insurers need to think about whether the data can be used to improve the verification needed for discounts on protective devices, and whether those discounts are offered on policies or directly on the purchase of the device. As the data from connected home devices flows in, the insurer can evaluate whether it can be used to determine eligibility for additional coverages in high risk segments of the market
3. Security and privacy. Insurers must first measure customers' willingness to disclose personal data as provided by sensors, video cameras, motion detectors and other devices. With data collected from multiple sources, insurers need to determine whether current safeguards are sufficient to protect customers' privacy. Audio and video capture capabilities pose specific privacy concern
4. Loss mitigation. As the use of in-home systems and devices becomes more widespread, insurers should set optimal targets for reductions in the number and size of losses. The new data delivered by such systems and devices will not translate automatically into specific, targeted loss mitigation programs. One possibility is to explore how to leverage current commercial lines loss mitigation programs as connected home data makes it more practical and efficient to offer lower-premium (and lower-exposure) homeowner products.
The challenge of jumping into the connected home market might seem daunting, but insurers can start by creating a vision of how to enter the connected home value chain. They can then experiment with concepts and technologies to test the value proposition of the chosen approach. Then, they can assess the connected home ecosystem to determine which partnerships to pursue.
The selected approach can be tested through a pilot program, with its impact on other areas of the company evaluated. Finally, the pilot lessons can be extended into new projects, with new technologies examined as they emerge.
While the connected home represents an enormous opportunity for insurers, it will not always be easy to identify concepts and partnerships that provide real value for customers while offering real potential gains for insurers and their partner organizations. Although establishing the right approach will require both rigorous research and careful self-analysis on the insurer's part, the potential rewards of participation in a rapidly growing market may be too great to overlook.
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