If you think big data and “the Internet of Things” are still of very limited relevance to insurance carrier technology investment, you might want to watch the AT&T Digital Life commercial (embedded below). The home security and automation technology solution shows that we’re already living in a highly connected world that includes mass commercial application of remote sensing and control. The implications of that for insurance are huge.
In the ad, two young adults arrive at a rustic retreat where the parents await. It emerges that the kids have stopped by at the house prior to arriving at the cabin in the woods. “Did you leave the house in good shape?” asks the father, skeptically. “Yeah, of course!” replies the son. “Sure you did,” the father observes to no one in particular, as he uses his cell phone to check status and remotely turn off everything that he can see was left on – including several lights, a TV with a game on, and a running faucet.
Fascinating. But what does it have to do with insurance? Is AT&T selling insurance? Well, not yet, as far as I know. Perhaps they have a “Digital Life Insurance” product in their future, but the Digital Life service affirms the potential of remote sensing technology for P&C insurance, which could extend to a new focus on loss control for personal lines. The technology could not only enable fascinating directions for new products and means of accessing market share, but could also help to recast the policyholder/insurer relationship into a collaborative model resembling what exists today between large commercial accounts and their brokers or carriers.
Anything that can be remotely controlled for security purposes can be monitored for risk purposes. And who’s a better risk, someone with a system that monitors whether, for example, faucets are left on or someone who doesn’t?
The ad is also interesting as a commentary on non-traditional competition. Suddenly AT&T is in the home security business? Well, why not, if innovations have made that a remote communications-driven business? One has to ask what other business could benefit from the remote exchange of data. At a recent industry conference, Ernie Hursh of BOLT Solutions delivered a presentation titled “What if Amazon Sold Insurance,” which drew a large crowd driven, no doubt, by fear. Viewers of the AT&T ad should wonder what will happen if AT&T and similar companies realize the potential insurance applications of their communications and control infrastructure – and their existing distribution networks.
According to AT&T’s commercial, the ‘solution’ proposed doesn’t work. Sure, the supposed subscriber was able to shut off the stuff his thoughtless kids left on but why wasn’t ‘dad’ alerted to the intrusion (read: home invasion) by a contracted security company or the house stormed by gendarmes if an alert wasn’t canceled by the homeowner? I know AT&T’s Digital Life system has ‘limited availability in certain areas,’ but apparently its functionality is limited as well. Buyer beware. Until they can pitch a properly constructed commercial, anyway.
That’s pretty funny. I guess you could put it down to poetic license.
Joe– I have Digital Life and Love it! I know and am alerted not only when, but WHO has entered the home, when they leave, pictures of them in the driveway (no interior camera at this time) if there are any sensors open, and what status the alarm is set at. I set up the codes for each individual for the front door lock-everyone has their own. The man in the commercial was notified when someone WITH ACCESS entered the home if he has set it up to notify him. I get a text when my grandson gets to our house after school and unlocks the door. It’s reassuring he is there and safe.
Anthony, very interesting piece and perspective. If a carrier can grasp the concept “how can we better manage risk?” that has value. Also think about the scenario to manage or protect against fraud. This can make the information gathering phase for a carrier very programatic: what, who, when, where, how and help get to the why. Very similar to how some carriers are testing the use of social media when dealing with insureds to validate or refute a claim. Thanks for sharing.
Blake, I’d love to hear you elaborate on the fraud angle. I think these capabilities help not only with risk management but in enabling a very different kind of customer relationship that would go along with that. Frankly, remote sensing technologies could make big differences in commercial insurance as well. Today insurers do spot checks of commercial equipment on an occasional basis.
There is no way I’d let my insurance agent see what’s in my house. Can you imagine what sort of security holes this opens up? Anyone within the agency, broker, carrier, etc. who isn’t trustworthy can determine when I’m home and when I’m not, and share that information with their “friends.”
And once remote monitoring comes in, think of the various entities fighting over what is “right.” The insurance industry says “leave lights on at night so burglars will think you’re home and get a discount” while the utilities say “turn off lights to conserve power–and get a discount.”
Tony, those are good objections but I don’t think they’re insuperable. First, what you say about the insurance application of the technology aslo applies to AT&T’s offering, and that company is already offering this commercially. It would be interesting to know how they deal with this kind of customer concern. One can imagine technical or contractual solutions.
In the same vein, if someone had told us 20 years ago that cars would include a black box that transmitted information to one’s insurance company, they would have laughed it off for similar reasons. As we’ve seen over the last 10 years, very different notions of privacy have emerged or at least very attenuated ones. People are increasingly willing to trade some aspect of privacy for something they value. The price has to be right, the service has to be right and the conditions have to be right.
Which brings me to your other point: if there’s a market for a service, buyers and sellers will be motivated to fight. Regulators will be under pressure to accomodate the market, as we’ve seen with e-signature, for example. In your example, the utilities say turn off lights and get a discount. Well, so what? Plenty of people are already leaving their lights on. It’s up to them whether doing so is worth a discount, or if leaving them off is worth whatever effect the insurance company says it will ahve on their premium.
True, Barry. Conveniences always have costs, and in information efficiency entails information vulnerability.
And whatever can be remotely monitored for security reasons can also be hacked for nefarious reasons.