5 Key Questions for Insurers About the Connected Home

The connected home opens possibilities for customized products and pricing, as well as understanding customers more deeply because of increased contact with them directly.

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The Internet of Things (IoT) is driving a new wave of innovative connected devices, buildings, and other physical objects.  The surge in IoT devices offers exponentially expanding opportunities and capabilities for all key stakeholders, disrupting value chains and forcing companies to recalibrate their business strategies. Within the IoT, the connected home segment is causing big data firms and insurers to re-evaluate how data is collected and analyzed.

The Connected Home is Where the Heart is

A connected home is a highly automated home that serves as the center of control for multiple services delivered over Wi-Fi and other wireless network communications.

The home is networked with numerous automated devices for home energy, entertainment and protection, including thermostats, smart locks, heating and cooling systems, smoke and water leakage sensors, and lighting and home entertainment systems. All of these devices are replete with collected data.

In a span of only a few years, the connected home is poised for mass-market adoption, and is quickly evolving as the linchpin in the IoT movement. According to a recent report from Gartner, there were 174 million smart homes in 2015, and that number will almost double this year to 339 million. Moreover, the firm predicts that by 2019, 1.9 billion connected home devices will be shipped, bringing in about $490 billion in revenue.

While the connected home has been in conception for years, technological advancements and open approaches to connectivity are driving consumer adoption. Additionally, media efforts and retailers are aiding in driving awareness to the larger industry, from manufacturers to end-users.

Having an automated home serves many purposes for customers, ranging from convenience to security. For example, automatic sensors allow dwellers to control climate, lighting and entertainment devices from afar to have their homes set to their preferences as soon as they walk in the door. Smart locks allow homeowners to monitor who is entering or leaving their home and control their locks. Consumers can close doors remotely and shut down pipes if there is a leakage, all from their mobile devices.

Who Owns the Data?

It is evident that these IoT devices are overflowing with useful data, but who owns it? The data belongs to the manufacturers of these products (such as sensors, locks, alarms and others), and insurance carriers don’t have immediate access. With this in mind, it’s imperative that P&C carriers consider how they can coalesce with the opportunities that are arising from the growing connected home segment.

As many home automation devices themselves are created with the intent of managing risk, such as avoiding home invasions or preventing damage, insurers can position themselves alongside this data as pioneers. There are tremendous benefits to key players across the spectrum for insurers to analyze and understand this data. This opens possibilities of providing customized products and pricing, as well as the opportunity to understand customers more deeply because of increased contact with them directly.

As connected home technology continues to advance, insurers will be able to utilize real-time data for loss prevention and assessment of risk. Moreover, by providing discounts, product benefits and coverage, insurers can understand risks more thoroughly and utilize real data-driven underwriting or loss control. Some key questions to consider are:

  1. How do insurers obtain the data?
  2. What key metrics should be developed in order to collect, assess, and track data quality?
  3. Once insurers obtain the data, how can they formulate underwriting and risk-scoring to identify and understand the customer better?
  4. What are the fundamental data points to extract from the deluge of information?
  5. How will insurers convert those insights into actions that lower loss ratios, create new products, more effectively price them, and ultimately retain customers?

While these questions will only be answered as the industry evolves, insurers and big data providers should prepare for major shifts in the industry. The connected home will continue to shape everyday life, and insurers must stay cognizant of how the industry will impact customers and policy premiums.

Amrita Dhar // Amrita Dhar is Insurance Solutions Marketing Manager, Saama Technologies. Dhar is a seasoned insurance professional and her diverse leadership experience includes more than ten years in the P&C insurance space, spanning product management, marketing, pricing, and product development. She has held  leadership roles managing P&L for large regions amounting to $800M. She has a passion for following disruptive industry trends that will have an impact on the insurance value chain.

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