Five in 10 US households with either homeowners or renters insurance policies are interested in installing smart devices in their home that can detect, prevent damages and notify them or their insurance company in the event of a loss, according to a report from market research firm Parks Associates.
Internet connected light bulbs, locks and kitchen appliances are close to becoming everyday household items. This is, in part because of the widespread adoption of smartphones and tablets, which has created demands for mobile and wireless applications.
The smart homes market, driven by the Internet of Things (IoT) spending, is set to grow 14.6 percent in 2018 to reach over $770 billion (£560 billion) according to a new forecast from the International Data Corporation (IDC). The market intelligence provider predicts that IoT will surpass the $1 trillion mark in 2020 and possibly reaching $1.1 trillion in 2021.
Future will tell if IDC forecasts are right but one thing for sure it that the technology keeps on moving so fast. Last Christmas, all everybody wanted was an Amazon Echo or Google Home. These were the two most popular voice assistant products that can play music, provide information, order a cab, control smart home devices and many other things.
Like telematics in vehicles that benefit insureds with car insurance discounts, navigation and security, IoT is gradually breaking into people’s homes. In fact, home automation technology is not new and has been talked about since the beginning of this century and even before.
In June 2000, BBC Health Correspondent Daniel Sandford reported on a project in which collaborated the charity Dementia Voice, the housing association Housing & Care 21 and the Bath Institute of Medical Engineering to develop a “Smart House” adapted for people with disabilities.
The house, for instance, was supposed to switch off the cooker when the pan boils dry, turn off the bath when left running and even turn the lights on as the residents move through the rooms.
Today, as the Internet takes hold in all aspects of life, many companies are rushing to get in the door by developing smarter home devices powered with the technology. Amazon Echo and Google Home are simply the start of a much bigger future, where millions of households will naturally interact with devices – just by talking to them.
However, there are different motivations and expectations between the generations to what smart homes could offer. Young people tend to be early adopters of new technologies and put emphasis on the media and entertainment (M&E) side compared to their senior counterparts who are more interested in energy efficiency, cost savings and safety.
A connected-home roadmap for the insurance industry then provides many incentives to engage with policyholders to prevent and mitigate risks and collect useful data. This could also help in changing the industry’s poor reputation, probably.
IoT Security and safety
Everyone has the right to feel safe and secure in their home and that’s why security remains the number 1 reason for using smart home systems. Access controls to a property such as IP cameras, video doorbells, doors sensors and other detection systems are hot devices right now.
Neos, a UK startup is challenging the status quo and developing a new product in the insurance market by trying to become the digital guardian – always looking after the things that households value the most.
The company packages IoT devices with home insurance policies; and on signing up insureds receive the devices along with access to a mobile app from which they are able to control all the various installed sensors and connected components. The app is also designed to alert policyholders in the events like a water leak, smoke detected or a front door being left open.
Co-founder and CEO Matt Poll says “The vision really is about moving insurance from [a] traditional claims, payout type solution… to one that’s much more preventative, and technology’s really the enabler for that. We also think that customers get quite a raw deal from their insurance company…for being a really good customer and not claiming.”
Increasing costs and demands of energy has led many households to find ways to monitor, control and save energy. Smart meters and Big Data certainly enable insureds to reduce gas and electricity bills, as well as the ability to remotely monitor the systems.
Likewise, a Canadian company named Ecobee is on a mission to create smarter Wi-Fi thermostats that manage room temperatures with clever sensors. The new devices come with built-in Amazon Alexa voice service that can even order groceries, read the news and much more.
Media and entertainment
As the trend confirms, traditional TV viewership continues to fall among every major demographics due to fierce competition from gaming, online streaming and social media. More and more people are shifting their time away from TV and instead opting for services such as YouTube, Netflix and Amazon, which allow them to watch what they want at any time.
Gaming is also becoming bigger by the day and smashing records. Activision’s latest release Call of Duty: WWII surpassed $1 billion in worldwide sales last year. The franchise is a multiplayer online shooting game set during World War II in Europe, as its name indicates.
Data and cyber risk
The proliferation in the number of devices becoming Internet connected is boosting the smart homes of the future towards a reality. Though, smart homes rely on data, and as data becomes more valuable, insurers will have to rethink new products in order to help protect the stored data against potential cyber risks.
Finally and as Parks Associates suggests home policyholders are open to the range of devices entering their homes only if it helps mitigate risks and provides benefits to the households’ convenience and wellbeing.
Insurers will have to find ways to address cybersecurity vulnerabilities in smart home systems as well as partnering up with hardware and software designers to develop products that offer real value to policyholders, while reaping potential gains for themselves and their partner organisations.
The connected home represents an enormous opportunity for insurers