What's holding insurers back from smart home device requirements?
Can these devices help reduce risks and provide benefits to insurers and policyholders alike?
Similar to the way auto telematics have changed the auto industry, smart home devices are transforming the way property owners monitor and detect risks within their spaces, and the way insurers operate.
From smart thermostats to sensors and cameras, these devices are helping detect risks like water leaks and sounding alarms before they turn into costly insurance claims, or worse, cause serious interruption to daily life with lengthy repairs. Which begs the question, why aren’t smart home devices a requirement to get property insurance and what’s holding insurers back?
The power of these devices is undeniable. If you’ve ever experienced something like a water leak, utilizing this technology seems like a no brainer. Even the smallest leak can lead to massive headaches. It’s not just the immediate clean up, it’s the process of filing an insurance claim, hiring a crew for remediation and then the eventual repairs — a process that can take months or longer. Luckily, smart home devices are making it possible to catch these issues before they turn into huge problems and cause serious disruption.
Let’s look at three reasons insurers may be hesitant to make this technology a requirement, and why there may be less to fear than they think.
1. Data sharing
Data privacy is a major concern in everything from posting on social media to filing taxes online. And while the assumption may be that people do not want to share smart home data due to privacy concerns — is that reality? The truth is, property owners are willing to share such information, especially among younger generations. According to a Capco survey, almost half of Gen Z (47%) and Gen Y (40%) U.S. policyholders would share their smart home device data with an insurer.
Younger generations have been utilizing technology, especially internet-connected devices, for most of their lives now. And it’s no surprise to see that they are willing to share the data collected to realize benefits such as lower insurance premiums and earlier risk detection. In fact, property owners across the board are eager to share the data collected if it means eliminating some of the costs and complexities that come with property ownership and insurance.
2. Return on investment
Another concern that many insurers have when it comes to smart home devices are the costs associated with the hardware. Will smart home technology yield a substantial return on investment (ROI)?
Yes, and some insurers like Hippo and Honey, offer discounts in return for their customers activating these devices. Nationwide polled homeowners and found that 66% already own at least one smart home device, but don’t realize they can save money on their premium as a result. The untapped potential is massive.
Not only are smart home devices helping insurers cut down the dollar amount spent on claims each year, but they are then able to take those savings and reward customers in the form of discounts on their premiums — discounts for using devices that many already own. As a result, customers are incentivized to stick with their carrier, increasing retention and resulting in positive customer engagement. It’s a mutually beneficial relationship between customer and insurer.
3. Behavioral shift
Sure, it’s tough to change consumer behavior, particularly when it comes to something like homeowners insurance which has been conducted the same way for so long. Especially when it comes to the perils property owners are monitoring. For example, we found that 84% of users didn’t monitor water before using our smart sensors.
This is an indication that not only do homeowners want to use this type of technology, but they’re open to new uses for it. While many people may purchase smart home devices to monitor for theft-related use cases, like opening and closing doors and windows, they quickly realize just how important early risk detection can be when they are alerted to a smoke alarm going off, a drastic temperature change or a water leak. This behavior is already shifting and insurers should capitalize on it.
The bottom line is that smart home devices are not only transforming the way property owners monitor their spaces, but it’s also changing the way insurers work and interact with policyholders. So why isn’t smart home tech a requirement to get property insurance? It’s time for insurers to ask themselves this question and realize the impact this technology can not only have on their business but their customers’ lives.
Brett Jurgens is the CEO and co-founder of Notion (acquired by Comcast in 2020), empowering home and property owners to be proactive in monitoring their spaces and most valued possessions. Through partner programs, Notion helps insurance carriers, agents and service providers provide value to their customers with Notion’s DIY smart monitoring technology.
This piece is published with permission from Notion and may not be reproduced or reprinted.
Opinions expressed here are the author’s own.
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