Auto and homeowners insurance are frontier business lines for technology disruption, as demonstrated by two stories featured in today’s Insurance Innovation Reporter newsletter. In our top story, we report that the National Transportation Safety Board (NTSB) has recommended that collision avoidance be installed in all vehicles during manufacture. We also report that Liberty Mutual has launched a program that rewards policyholders who use Nest smoke and carbon monoxide detectors. While both of these instances represent small steps, they foreshadow new ways of doing business—and ways that could have profound effects on insurance premium.
To put the NTSB story in perspective, the organization can only make recommend, not mandate. In fact, these latest recommendations were made out of the NTSB’s frustration that earlier recommendations to the National Highway Traffic Safety Administration (NHTSA) have not been adequately addressed. How the NHTSA will respond remains to be seen, but the world will not stand still in the meantime: auto manufacturers are increasingly including collision avoidance technologies, regardless of a mandate to do so. A mandate might help, but in either case, there will be change—and that change will affect auto insurance premium. As Celent analyst Donald Light comments:
“The long-term implications of collision avoidance technologies for auto insurers are very similar to those of autonomous vehicles: fewer and less severe losses, resulting in competitive and regulatory pressure which will drive down premiums substantially.”
Liberty Mutual’s news is also a small step, but it points to a destination of a connected home environment in which many hazards can be controlled and losses prevented—which will tend to drive down homeowners’ insurance premium. What is especially significant about Liberty Mutual’s new program is that it invites policyholders to share data gathered through ubiquitous connectivity.
Liberty Mutual’s Smart Home Verified Discount program provides discounts for self-monitored devices as well as professionally monitored systems, according to company spokesman Glenn Greenberg. “Under the Smart Home Verified Discount Program, if a Nest Protect customer opts in to share their data with Liberty Mutual, they can double their applicable discount,” he says.
As to the carrier’s longer-term direction, Greenberg adds, “Liberty Mutual continually evaluates new and emerging technologies, particularly those that can help our customers live safer, more secure lives. We strive to enhance our product offering to reflect these new technologies.”
Liberty Mutual is not Nest’s only insurance partner, and it is likely that Nest will be only one of many sensor-driven devices in the domestic environment that will eventually connect to the insurance ecosystem. The proliferation of these devices will introduce a new level of risk awareness into the domestic environment, and the future is not far off in which smart home technology’s connection to the insurance ecosystem will equate to proactive loss control.