Once a vision of the future, the connected home is no longer the stuff of science fiction. Today, connected devices are changing the way more than 29 million households go about their daily lives, up from 22 million in 2016. This growing market is opening up opportunities across a variety of industries - insurance among them as ripe for transformation.
In fact, it seems that some insurers have already caught on to the potential. As early as 2015, Liberty Mutual began offering discounts to customers with a Nest smoke and carbon monoxide alarm installed in their homes. More recently, American Family Insurance started offering up to 5% savings on policies for homeowners with qualifying smart home devices or home security systems. State Farm is now offering exclusive discounts on connected home monitoring systems like Canary and ADT among other perks.
Perhaps the trend can be summarized like this: many insurance companies that have taken the smart home plunge are offering discounts to policyholders who use connected devices in exchange for the risk reduction that these solutions provide. A win-win for everyone, right?
The Trend Has Just Begun
While there’s no doubt that both insurers and policyholders are benefitting from smart home technologies, I’d argue that each side could be winning even more. Like most trends, I believe this one has started off with limited adoption and hasn’t kicked into full gear just yet. Insurance companies have barely scratched the surface when it comes to integrating smart technologies into their business models. By simply offering discounts, they haven’t quite figured out what’s next.
For starters, as InsurTech company Hippo explains, connected devices could improve claims processing. Insurers could use the data that these technologies provide to evaluate losses, enabling them to settle claims faster and reimburse customers sooner. They would not only gain internal efficiencies but also improve customer satisfaction as policyholders often rely on these funds to make necessary home repairs.
Insurance companies might also think about leveraging smart home technologies to expand their service offerings. Imagine alerting customers when a device registers an issue with a home appliance or system? Insurers would provide a new value stream to their customers, driving added personalization and strengthening customer relationships in the process.
By extension, consider the various other ways that insurers could leverage the data from connected devices to drive improvements. From delivering even more personalization in the form of tailored policy recommendations to more accurate underwriting, the possibilities will continue to unfold as insurers’ smart home strategies evolve.
While data privacy and security remain valid concerns, smart home technologies are introducing tremendous opportunity for insurers to transform their business models. By capitalizing on this potential, they can continue to improve their customer experiences, resulting in a win-win that goes well beyond risk reduction and discounts.
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