Telematics has been around for well over a decade, but it’s only recently begun to take hold in the auto insurance space, with potential impacts to insurance premium. Along a similar trajectory, smart home devices are beginning to make an entrance in the prevention, maintenance and mitigation spaces for homeowners.
An increasing number of consumers are adopting smart home telematics technology. My wife and I use smart devices in our house, and we are not alone. According to Mckinsey & Company, there were 29 million connected homes in the U.S. in 2017. And that number is growing rapidly.
The opportunities for IAs
As consumers consider smart home technology, they’ll need advice on products, proper usage and how smart devices may affect their insurance policies and premiums. IAs can use this customer need to establish themselves as trusted advisors for risk management questions outside traditional insurance.
The in-home telematics technology that is most likely to impact insurance focuses on identifying risks and preventing losses. It has the potential to reduce the frequency and severity of claims, which may drive down insurance premiums.
Ultimately, fewer losses and lower premiums can be a win-win for agents and consumers. However, these changes to home insurance highlight the need for IAs to position themselves as trusted risk advisors—offering a holistic approach to customers’ needs.
Independent agents are in a unique position to offer clients the counsel they need to make wise decisions about these new technologies. But, in order to offer advice, agents must familiarize themselves with smart home tech.
Connected home devices can be broken out in a number of ways—users may have devices that streamline entertainment, monitor their health data or help them manage their home security. But there are a few main areas agents should keep an eye on that are likely to impact the insurance space:
Security & safety
These devices help consumers monitor their home security to prevent theft and damage.
Remote video/security cameras – give consumers the ability to monitor the house, often through an app. A friend of mine bought a set of these from Amazon during a sale. He set them up outside his house; a couple months later, his wife heard noises and watched on the phone app as someone snuck around the side of their home. Without going outside, she knew there was a stranger present and called the police from the safety of the bedroom.
Smart locks – give consumers the ability to lock and unlock the door remotely. They can also provide different codes for different people so they know who is coming and going. My wife and I have a smart lock on our accessory dwelling unit that we AirBnB. It’s made renting the apartment out hassle-free, and we know exactly when the cleaner comes to ready it for the next guest.
Connected smoke/CO detectors – alert consumers if there’s an issue at home without them having to be there (app based). Only a couple years ago, we had a methane leak at our house—the stove downstairs was left on by tenants. Fortunately, we came home in time to shut it off, but we had to open doors and windows. This easily could have been disastrous, but if we had a smart detector at the time, we could have called a neighbor while at work to deal with the problem.
These devices help consumers manage their energy consumption to prevent or minimize losses.
Remote lighting controls – offer consumers the ability to turn lights on and off remotely. This helps with energy use (ensuring they’ve turned off the lights when they’re away) and second-level security protection (turning off and on lights to make it look like someone’s home). I’ve hooked ours up to our Amazon Echo and can turn off our loft/office lights without returning upstairs or going into the app.
Water sensors and smart valves – detect water losses and, in some cases, shut off water to prevent damage. According to Safeco data, water losses are the second most common form of homeowner claim. One in 50 homes suffer a water loss annually.
Smart thermostats – give consumers more control over heat and AC use. Not likely to impact the insurance space.
Other areas of consideration
In the McKinsey survey, 26 percent of connected home users reported owning three or more devices. While other devices such as smart appliances, wellness monitors and smart speakers may not directly impact the insurance industry any time soon, IAs should be aware of the new tech and how it may integrate with other devices in the future. For example, smart speakers or entertainment devices such as Amazon Echo and Google Home are becoming smart home hubs, controlling other connected devices.
As more consumers adopt smart home technology, agents should keep an eye on emerging trends and technology to advise clients. Establishing themselves as advisors in this area can help agents deepen client relationships, build loyalty and better prepare themselves and their clients for the future.