The connected car, home and lifestyle are driving innovation for the P&C and life Insurers. Sensors and Devices along with M2M communication is creating new business models for insurers. By 2016, the global connected home market is expected to reach $235B. P&C Insurance carriers are trying to find the right entry point in this complex ecosystem. As smart home technology evolves, insurers may have the opportunity to use real-time telemetric data for the assessment of risk and prevention of loss. Home automation or “smart home” technology is making inroads through popular consumer solutions and already provides opportunities for underwriters to recognize lower risk factors among customers. The smart home represents a significant market opportunity
- Customer Retention and Cross Sell /Up Sell
- Better risk management and loss prevention
- Value Added services
- Catastrophe Response and Alert
- Preventive Care and Maintenance
- Repair and Restoration Services
- Home monitoring
- Underwriting Optimization
- Claims Optimization and Fraud Prevention
Most carriers are still in the early stages of IOT – smart Home market. Within the connected home, insurers are focused primarily on these different data sources
- Home Security and Monitoring – Alarms, Smart Carpet, Video, Smart Door, etc
- Utility Companies – Electricity, Gas, Water, Cable companies
- External Weather – Flood, Hurricane, Tornadoes, Hails, Snow, Earthquake, Lightening, etc
- Connected Appliances – Refrigerator, Oven, Microwave, Dishwasher, Washer-Dryers, etc
- Solar Panels
- Smoke and Fire
- Smoke / Carbon Monoxide Detectors
- Climate Control Systems
- Pet Monitoring Systems
Both Google and Apple have moved aggressively into this space. The
market is in an early adoption phase and it is unclear which brands will win out. The market is breaking out from niche solutions for the wealthy, e.g. monitored security systems, to the mass market. Google’s Nest has established partnerships with American Family Insurance and Liberty Mutual Insurance to offset the costs of a Nest Protect smoke detector, and establish a monthly discount for homes that link their Nest smoke detectors to the insurance firms. The application and integration of these new data sources with underwriting and claims application will be bring tremendous value to insurance industry. The carriers will be looking for data aggregation platform that will provide the data mashup and services that can be consumed as API in their current application portfolio.
Consumers will likely see the connected home as a set of possibilities—expanded entertainment options, greater physical comfort, a connected lifestyle, and reduced risk—and use it to seek broad solutions to everyday tasks and big life events. As they embrace propositions that seamlessly combine these possibilities, consumers will blur existing market boundaries. Players such as AT&T are even linking connected car and smart home technologies so users can control their homes from a vehicle dashboard. Very soon like auto industries, very soon, home builders will offer smart home and integrated capabilities.
Compared to the connected car, the connected home is a less mature, less certain, and more complex insurance market. Carriers and telcos already have expanded from competing with security monitoring companies such as ADT into smart home offerings such as Comcast Xfinity Home, Time Warner Cable’s Intelligent Home, or Home by SFR in France. And AT&T’s Digital Life offering is building on open standards and protocols to integrate with products from many companies, not just their own.
A USA State of the Smart Home Report in May 2014 based on data from more than 900 U.S. adults, found that:
- 86% ranked property loss protection as a top reason for a smart home system
- 78% of consumers ranked energy management as one of the top features that matter most in the smart home
- 67% ranked personal and family security as the number one reason for using a smart home system
- 52% of pet owners listed pet monitoring as one of the top five most important reasons for using a smart home service
A 2013 report from Berg Insight estimates that North America is the most advanced region in the world for smart home solutions with an installed base of 3.5 million systems at the end of 2012. Between 2012 and 2017 the installed base is forecasted to grow at a compound annual growth rate of 55.0 percent to reach 31.4 million smart home systems.
The next logical step for insurers will be to move beyond knowing that devices are in place, to monitoring the data real-time from such devices. This would be similar to telematics from cars. Limited amount of private information will be expected in order to offer a premium discount. Premium discounts will not just depend on knowing a device is there, but on actual intelligence from the device. Insurers will also monitor use of the house to see if certain behaviors lead to increased risk. The insurance will be usage based like utility model. The monthly premium charged will in some cases become a variable figure, based on behavior that month and perceived risk incurred. This will incentivise the homeowner to modify home use, as has happened with car telematics.
In order to offer these products and services, either device data will need to become ‘open’ so that anyinsurer can use it, or insurers will need to forge strategic partnerships with major players in the connected home arena. If the former, customer loyalty and switching will be an issue. If the latter, picking the right partner will become key.