Smart devices are rapidly proliferating in the home and workplace as customers and insurance carriers realize the benefits of equipping buildings and homes with connected technology. This connected home insurance approach is critical to reducing claims and losses and presents a massive opportunity, considering 70 million households across the U.S. have home insurance.
The first thought that comes to mind with smart devices is often deterring burglars through connected doorbells and home security cameras. But in fact, the threat of theft is far less frequent or severe than other risks like fire and water damage. Therefore, the insurance industry has a responsibility to educate homeowners and small and medium businesses (SMBs) on how connected property programs can help consumers quickly detect and prevent issues that could cause damage to their buildings.
What's Driving the Adoption of Smart Property Technology?
Smart property technology adoption is driven by the exponential growth of the Internet of Things (IoT). McKinsey and Company estimates that 127 new IoT devices go online every second and predicts 43 billion devices will be in existence by 2023.
As noted in a webinar with Parks Associates with Notion CEO, Brett Jurgens and Chubb's Elaine George, this surge has seen houses increasingly equipped with devices like connected doorbells, kettles, lights, refrigerators, thermostats and washing machines, all controlled via mobile apps or voice commands. As a result, the proliferation of devices offers an opportunity to source accurate, real-time data from homeowners that can mitigate the risk of fires and water leaks. This information is critical to homeowners and SMB owners as water damage, in particular, is occurring with greater frequency due to aging buildings, inconsistent infrastructure and natural disasters.
Installing smart technology enables property owners to gain around-the-clock visibility of what’s happening in their building. They can be alerted immediately if water damage or a fire risk occurs and take action to limit the damage, even if they’re not present.
The contextual data from these incidents is also vital to carriers and property owners. Understanding how, when and where a water leak occurred can be the difference between superficial damage and a critical disaster that leads to costly repairs or a loss of business. Sensors must be installed in places that are at high risk or rarely accessed, such as water heaters, pumps, heating, ventilation, air conditioning units and bathrooms.
Why Is Smart Property Monitoring Helpful for Carriers?
Installing smart devices is a win-win for homeowners, small businesses and insurance carriers. From homeowners’ and small businesses’ perspectives, it helps to drive down claims and provides peace of mind when no one is at home or the office. Insurance carriers, meanwhile, can better understand their customers’ risks and educate them on proactively protecting their buildings.
One of the most significant advantages of installing smart devices for connected home insurance is having real-time data about what’s happening in a home or office. Customers are increasingly adopting smart tech to detect water and fire risks. For instance, two-thirds of Notion customers use Notion Sensors to detect water leaks.
The usage of smart tech offers significant benefits for carriers. For example, customers that install a Notion kit see a 10% reduction in losses, and those that keep a kit online see up to 20% reductions. As a result, installation rates are rising, with insurance carriers reporting more than 75% of their customers installing new sensors.
How Can Programs Prove ROI?
Proving the ROI of a connected home insurance solution will likely differ from one carrier to another. It will also depend on whether the carrier wants to attract new customers, reduce losses and claim rates, improve customer engagement and retention, and more.
Regardless of their objective, there is a good strategy for deploying IoT devices with insurance carriers, both in terms of customer acquisition and claims reduction.
Carriers must focus on metrics that help them appeal to and win new customers. Marketing initiatives are likely to play a significant role in engaging consumers through competitive pricing and introducing new incentives that don’t affect price points. Forward-thinking carriers are already working with smart technology providers to offer discounted devices and kits to new policy applicants. Carriers are also working with tech providers to subsidize costs for homeowners who install smart devices.
Reducing Losses and Claims
It’s all well and good when homeowners purchase smart tech, but if they don’t install kits and ensure they remain online, then they won’t reap the benefits. The onus is on carriers to educate customers on the benefits of being proactive and detecting issues that could cause damage to their homes as quickly as possible.
The first step toward proving ROI in any smart insurance program has to be crafting a clear objective for what the carrier wants to achieve then aligning that with company-wide goals. That includes considering which departments across the organization stand to benefit from a connected home insurance initiative.
How Do Carriers Go About Developing a Smart Property Program?
Developing a smart home insurance program requires carriers to build and implement a three-stage model:
- Pilot: Developing a smart program begins with the pilot stage, at which carriers set focused targets they want the program to achieve. This should include how they want the program to gain traction and appeal to customers. As the program expands and gains more policyholders, carriers can work with partners to optimize offers and evolve them based on customer insights.
- Scale: The second stage will widen the program to more policyholders, enabling carriers to analyze the data and evolve their offerings accordingly. The program’s scope needs to be prioritized and aligned directly with the strategic objectives drawn up in the pilot phase. Carriers can now begin expanding their metrics and analyze the longer-term benefits of the program.
- Expand: Now that carriers know their program is working efficiently, they can begin expanding it to other policyholders. This could include providing solutions for renters and SMBs, working with third-party partners and enhancing their offerings.
Notion works with more than 11 leading insurance carriers to provide smart home insurance solutions to their customers. This approach is increasing engagement between customers and insurance carriers. It’s also changing how homeowners think about insurance — from a reactive service to a proactive solution.
Discover how Notion partners with insurance carriers and get more information about smart home opportunities by watching the Parks Associates "Insurance and the Smart Home" webinar.