How the IoT presents a new path for insurance
Consumers want insurers to capitalize on the damage prevention benefits of smart home devices.
Insurers are starting to turn to technology to enhance offerings and boost standing against competition. Cloud features such as chatbots, AI, mobile apps and online resources have been moving into the industry to digitize and automate the traditional insurance experience.
But the Internet of Things (IoT) can incite a more tangible transformation for insurance, where smart devices paired with cloud services, data and monitoring can be capitalized for property protection.
IoT device adoption has been trending upward in recent years as smart home devices like sensors, cameras, thermostats, door locks and lights give homeowners more control of their home from their smartphone or with a voice command to a smart assistant. Purchases of these devices have been rising: According to the Parks Associates report “Race to Control the Smart Home Ecosystem: Attracting Partners,” purchase intentions for smart home products overall have increased from 35% in 2016 to 43% at the end of 2018, a 23% increase in two years.
Smart assistants have been a driver in smart home awareness and adoption. This, paired with the vast number of benefits that smart home technology can provide to both homeowners and renters, has been steadily increasing adoption, which is expected to grow strongly in the next year, according to the Consumer Technology Association (CTA).
In-home IoT devices provide personal benefits to each user, but there are a few main reasons for smart home device purchasing, as identified in a study from PC Mag. These reasons include:
- “Makes my life easier”;
- “Energy efficiency”;
- “Maximizes home security”; and
- “Cost-effectiveness.”
Smarter, safer properties
The beginnings of the insurance and IoT collaboration are set, and homeowners are seeking ways to gain monetary benefit from their devices.
In a recent whitepaper, Parks Associates details that homeowners and renters are interested in insurance services that can bring savings and prevent potential risks. “A restoration service that repairs damage is the most appealing service among insured households, but there is strong interest in proactive services, which would be enabled by smart home devices and AI capabilities to detect and prevent risk situations,” said Brad Russell, research director, connected home, Parks Associates. There is consumer interest in cooperative insurance and IoT technology programs, even in early smart home adoption. The industry expects programs to grow in direct relation to device adoption.
The benefits of IoT devices could be increased when insurers find ways to harness the power of the IoT in new partnerships for home damage prevention:
Simple but powerful technology
IoT technology can become an opportunity for insurers as a simple, effective tool for home management to prevent or lessen common forms of damage like water or fire. Simple sensor implementation can give homeowners and renters contextual information about the conditions of the property related to water, fire, smoke, carbon monoxide, open doors or windows, humidity, room occupancy, temperature and more.
Consumers can use this information to proactively monitor their property for damage.
Consider water, the leading causes for claims: “About one in 50 insured homes has a property damage claim caused by water damage or freezing each year,” according to the Insurance Information Institute.
The smart home can disrupt this damage: A water detector such as those from such brands as Notion, Fortrezz or Guardian can send homeowners a push notification if moisture is detected. Placed in key, at-risk areas of the home, such as under sinks, behind washing machines and in the basement, a water sensor makes it easy for a homeowner to investigate a situation and mitigate damage. Instead of arriving home to a kitchen flooded from a leaky pipe, a notification of water detected could send an owner home earlier to find and address a small puddle before it becomes more problematic damage.
And water detection is just the starting point. With the IoT, home management becomes proactive against damage instead of reactive.
Uniting in home protection
The chain of events with simple IoT device intervention is vastly different than today’s insurance model. As opposed to homeowners discovering damage that could have been escalating for hours or even days, data gives homeowners the ability to intervene to stop damage sooner or completely.
Other than regular inspections and home maintenance, the IoT has become the first method for homeowners and renters to monitor their homes against causes of insurance claims. Data monitoring with IoT devices allows homeowners to work toward reducing damage, sparing them the associated stress, lost time, expense and aggravation. On the other side of the coin, insurers benefit from fewer or lessened claims. IoT technology can become the common thread uniting insurers and the insured in the common goal to reduce home damage and claims.
The mutual benefits of proactive home management using IoT devices can create a new dynamic, with a better partnership and more regular communication about keeping the home protected. An insurer could use damage reporting from IoT devices to process claims or suggest preventative home maintenance, or even provide smart home systems and other home care services. IoT devices could shift the dynamic of the insurer-insured relationship to one rooted in home care, prevention and action.
Growth potential
As the baseline of an IoT-led insurance experience is built, there is opportunity for it to grow to further benefit the insurer-customer partnership. Other features such as professional installation and support, data analytics, an integrated app experience, or even other home services like regular inspection could be incorporated into a program, customized for the specific risks to the home based on regional factors.
Today, the majority of IoT devices are installed by the homeowner, in the do-it-yourself (DIY) model. As each home is different, homeowners can select the number of water or smoke detectors needed to adequately monitor their home. Most devices are simple to install, requiring pairing to an app and/or hub, and placing or sticking on the area to be monitored. But as these systems become more complex and capable, insurers could do more to support good smart home practices, providing tips and support for device selection and installation, professional installation for system optimization against damage and easing the burden of technology management for customers.
IoT system capability could also be enhanced with other experiences. AI and data analytics are advancing, and in the future, they could be used to further automate home monitoring. An early example is the Guardian system, which includes a sensor that sends an alert when water is detected and then does even more by letting the homeowner remotely shut the water supply with a smart shutoff valve. A more intelligent system could further reduce the need for homeowner intervention by automatically activating the smart valve when water is detected. Such a system could be tied into the insurance offering to prevent damage, and automatically send data about the temperature and amount of water detected for evaluation to start a claim faster. Or, more advanced sensors could indicate when home maintenance would be needed, such as air filter, water tank, or pipe replacement.
With the entire experience integrated into a single mobile app, insurance can become a more proactive automatic process, more delightful and more beneficial to homeowners. In this model, the title “insurer” could even be adjusted to “home management partner,” as proactivity and coverage further intertwine to keep properties protected. The IoT can create a shift in the insurance model to proactively protect homes and property. Implementing a program with devices can transform insurers into partners for homeowners in home management and can be the starting point for more robust integrations and services in the future.
Daniel Turgel (dturgel@mysmartinsur.com) is CEO and co-founder of smartinsure, a company leveraging smart home technology in proactive home protection and insurance. Opinions expressed here are the author’s own.
See also: