THE SMART HOME COMETH
While the use of telematics in cars is nothing new, extending the technology into the home marks a significant change for our customers and for household insurance. Smart technology in the home is wide-ranging – security systems; fridges that re-order your favourite foods when stocks are running low; kettles that you can switch on to be ready to make a cuppa by the time you get home – and it seems there is a smart device for almost everything to improve the comfort and safety of your home.
The prolific amount of household data that these smart devices collect present significant opportunities for insurers to not only insure but even prevent accidents in the first place and so improve the proposition for the customer. This data will also give insurers the ability to detect fraud and validate claims remotely. As such, it’s an area of growing interest in the industry, as increasingly the substantial benefits of the connected home are being realised.
DEFINING THE SMART HOME
Smart or connected homes can be broadly defined as a home equipped with lighting, heating and electronic devices that can be controlled remotely by smartphone or computer. There are numerous different connected home devices available, including:
Smart locks – these allow you to check, lock and unlock your house remotely, quite literally at the press of a button on your smartphone. They offer direct and flexible control over your home, meaning you can unlock the doors if, for example, you have a delivery arriving at midday. Certain types that allow you to authorise who can enter or that use fingerprint or retinal scanning and voice/other recognition software are also available.
Smart alarms – there are many different types, with different features. Some of the most popular include motion sensors that can be set to turn light(s) on in your house if movement is detected, to deter thieves. Special intruder alarms can not only detect intrusion but also make calls and take pictures/videos. Smoke and water alarms are also able to detect any leaks, alert owners and shut off supplies, before disaster strikes.
Smart heating – can provide significant cost savings through thermostats that learn your heating habits and can be switched on or off through an app on your phone, allowing you to control your heating remotely. According to the BBC, it’s estimated that by 2020 most homes in the UK will have a smart thermostat installed.
Smart lighting – another useful theft deterrent, these can also be controlled remotely and used when you’re away from home. A room lit 24/7 can be conspicuous and smart lighting can create a much more realistic impression that someone is at home.
Smart pet monitors – these enable pet owners to use their smartphone to view their pet at home. You can check on your pet when away from home, record their behaviour and even monitor your home’s temperature. Door sensors can also monitor when a dog walker or cat sitter comes in and out of the house and if your pet goes in a room that it’s not allowed in! Other features allow you to switch on a radio, light or portable heater to keep your pet comfortable and content.
Smart energy monitors – these allow users to monitor their energy usage by specific device such as kettles, washing machines or lights, among others. By tracking the energy consumption of each device, they are also able to predict when items have developed a fault and are likely to break.
PAVING THE WAY: APPLICATION WITHIN INSURANCE
The benefits these devices bring extend beyond the practical advantages they offer to the individual homeowner. Their application within insurance could provide many additional benefits to insurers and customers alike. Initial actions by insurers in the connected home space have largely involved entering into partnerships with technology providers, under the assumption that consumers who have smart devices installed within their homes are generally a lower risk. The logic behind this is that if an individual has, for example, a smart security system installed in their home, they themselves become a better risk manager, taking extra provisions to secure their home and prevent unwanted intrusions.
However, smart home technology’s potential within insurance is much greater than this. The next step is to, with permission, utilise the data they collect to gain a greater insight into customers and evaluate if certain behaviours lead to increased or decreased risk. The benefits of doing so are wide-ranging. These include:
IMPROVED AND TAILORED INSURANCE OFFERINGS
The huge and various amounts of household data that these different devices collect could be utilised to give insurers a better understanding of the individual customer and therefore improve risk profiling and underwriting capabilities.
Connected devices offer insurers a more detailed method of pricing, by providing insight to what actually goes on within a home, rather than using general data such as postcode or demographic profiling. As a result, smart home devices could enable insurers to improve their product offerings, through policies and pricing which reflect actual, individual risk.
DAMAGE PREVENTION AND ACCIDENT PREDICTION
Connected home devices are able to predict accidents before they happen and, as a result, prevent damage to the home. Examples of this include motion sensors which detect intruders and trigger an alarm; smart smoke systems which predict a fire by monitoring temperature and humidity and contact a professional to resolve the issue before it develops; heating systems which detect when your pipes are about to freeze; water systems that detect common sources of potential water leaks and interrupt the water supply. By reducing accidents and therefore the number and severity of claims, there is no doubt that the application of these devices in insurance could prove valuable to both the customer and insurer.
Furthermore, data from connected homes could detect or deter fraudulent claims, such as claiming accidental damage when it can be proven that no one was at home.
Data gathered from connected homes can also be used to validate claims remotely. Take, for example, a smart energy monitor, which has detected a fault with your hair straighteners. Imagine that these faulty hair straighteners cause a house fire and the smart smoke system detects this; the data from both these devices could be used to help validate a claim for fire damage.
SEIZING THE OPPORTUNITY
It’s important for insurers to have the right systems and processes in place to deal with these advances in technology, which in turn can deliver substantial benefits for our customers. Smart home devices have the potential to transform household insurance, enabling the development of products that are centred around customers.
As with all emerging technology, there is work for us all to do to ensure we remain abreast of the new trends and are prepared to manage both the risks and rewards associated with the connected home.
There have already been cases in the UK of hackers getting to PCs via smart devices, in particular the first generation of smart fridges. It is therefore vital to ensure that all of your smart devices have at least the level of anti-virus/anti-hacking protection that your PCs, laptops and phones have.
For more information and bespoke quotations please call Diamond Insurance Consultants on 01442 825481