In 2020, predicting homeowner risk goes mainstream
These trends to watch in 2020 will paint a new picture of home insurance in the next decade.
Over the past year, several companies have made their mark on the insurance industry through sizable mergers and strategic acquisitions. From bold tech platforms to proactive underwriting and newcomers seeking the most significant ways to distinguish themselves from the staid pack of we’ve-always-done-it-that-way players, the industry is going through some major changes.
There have been successes as well as monumental failures, and a sense of grounding when it comes to the pace of growth for the sake of growth versus actual viability and appropriate valuations.
The real determining factors for success in 2020 will remain firmly with who is serving their customer base most effectively. As InsurTechs work to bring the customer back to the center of the insurance product, we’re eager to see a shift across the industry as a whole. Some of the latest trends we’re tracking, and in some cases leading, will paint a new picture of home insurance in the next decade.
Here are a few of the most significant trends to watch in 2020 as the industry landscape evolves.
Dynamic, proactive underwriting
From an underwriting perspective, history has dictated that policy details and coverage amounts are based on a single, initial risk assessment, as though the circumstances of this one snapshot in time will remain unchanged over the course of a policy. Consequently, homeowners have found themselves under-insured with policies that are outdated when they need to file a claim several years after they purchased the policy.
Today’s technology enables us — compels us — to do better. InsurTechs have already made great strides in mitigating these challenges for customers and will continue to aggressively grow this opportunity in the coming year.
We expect there’s going to be a bigger transition from static numbers to big data, which will allow for a more forward-thinking, granular approach to assessing risk in real time. The concept essentially takes traditional data — based on recorded information and events of the past — and models a new approach to risk assessment that better anticipates the future.
In the early stages of home insurance, underwriting risk almost exclusively occurred at the zip-code level. Over the last few years, that has transitioned with the rise of big data, analytics and artificial intelligence, allowing risk to be priced per property to better determine the appropriate coverage for customers.
We do this at Hippo with the help of our partners like Arturo and GIA Map, utilizing satellite data and real-time information to ensure they have the precise coverage they do need. Our approach is also designed to help customers identify the things that may go unnoticed, like a damaged roof using satellite imagery partners or shrubbery that could be encroaching on a property’s invisible fire line. This way, we can alert clients to these potential risks in their home, and they can proactively address the issues before they become major claims.
We also use the model to identify new builds or additions to properties, like swimming pools, that are not required for customers but give them the option to update policies.
Working smarter, not harder
As I see it, smart homes are starting to add a lot more value to consumers beyond digital assistants and remote-controlled lighting. A number of products have hit the market in the last couple of years that actively prevent some of the leading events that result in homeowners’ insurance claims. Hippo partners with SimpliSafe, Notion and Kangaroo, which can detect virtually anything going wrong in a home from carbon monoxide leaks and frozen pipes to unexpected motion due to a break-in.
It’s estimated that smart home products can result in savings between 2% and 20% on overall premiums. For instance, security systems are known to deter as much as 60% of thefts and can lower your home insurance premiums by 5%.
Dozens of insurance companies — InsurTechs and legacy incumbents alike — are exploring the benefits of smart devices, even encouraging customers to invest in them on their own. Even in the latter case, the ROI on these devices can be significant.
The discounts and smart home incentives some companies offer signal the long-term impact preventative measures can make.
There also is a strategic side to the smart home approach, which we explored with our recent acquisition of Sheltr. Sheltr’s annual “check-ups” on a customer’s home can identify filters needing replacement, leaks, venting that needs cleaning and other things that are small and easy to address until they’re not.
New-build tech stacks
Supplemental tech add-ons that have filled in capability gaps for traditional insurers for the past several years will start to show signs of weakness throughout 2020. Since incumbent industry players have been built on static models that cater only to static assessments, they have understandably leaned heavily on purchasing new tech capabilities from industry specialists like Guidewire and others. Such alliances give them additional tech that enhances the customer experience but will never be fully integrated into the company’s infrastructure, much like after-market vehicle customizations. Some InsurTechs have also gone this route, as they focus more on building the actual insurance product.
The challenge that has come to light is an incongruity of this specialty add-on software and a company’s individual structure and needs. Because of this, we’ll see more InsurTechs choose to build out their own tech stacks from the ground up, customized to their unique infrastructures. This is more efficient and cost-effective for the company and will ultimately deliver a more tailored customer experience.
All of these trends point in the same direction: streamlined, personalized homeowners’ insurance policies and procedures for customers. The greatest value of InsurTech is transitioning the traditionally daunting experience from a stale one to a modern one, similar to how today’s consumers interact with other online services and retail products. The philosophy is changing rapidly from ‘what YOU have to do to become my customer’ vs. ‘what I have to do to become your provider,’ with the customer at the center of new developments. Companies will have to plan for a comprehensive customer experience beyond the initial purchase point, always bearing in mind that we’re in the business of helping people protect their most valuable assets. This shift in focus will ultimately change the way we think of progress throughout the industry in 2020 and over the decade beyond.
Rick McCatheron is chief insurance officer at Hippo Insurance, an InsurTech company that allows homeowners to get a quote and purchase home insurance online in 60 seconds or less and obtain smarter coverage for modern households. This includes protection for possessions like appliances, consumer electronics and home offices. To reach McCatheron, send email to hello@myhippo.com.
These opinions are the author’s own.
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