Moving Beyond the Hype: the Reality of the Connected Home
The Internet of Things (IoT) is changing the way, insurers and big data firms are thinking about how data is collected and interpreted. Like many other things within the IoT, the “connected home” brings big changes to insurers.
A connected home is a networked home to which multiple services are delivered over superfast broadband.*
Numerous automated home energy and protection devices associated with the connected home, such as: smart locks, security, smoke and water leakage alarms, heating or cooling systems are now providing data in real time.
The connected home concept is quickly transitioning from hype to a tangible and growing category, worthy of focus by a number of media and business publications.
- Business Insider recently mentioned that connected home products are in a high growth phase for the next few years. Currently, connected home products account for $61 billion in sales. By 2019, that number could surpass $400 billion.. Leading the way in connected home devices are home energy products and safety and security systems. · A 2013 Berg Insight report forecasted that there will be 31.4 million installed smart-home systems in the U.S. by 2017, with annual revenues(including from hardware, services and installation) reaching $9.4 billion.
- A 2013 study by Harvard’s Joint Center for Housing Studies predicted that adding smart automation would be a top trend in home remodeling for the next five to ten years.
There are many reasons that customers are adding automation to their homes. Automatic sensors allow them to control climate, lighting and entertainment devices from a distance. Smart locks allow the homeowner to control door locks, as well as monitor who is entering or leaving a home. It is also possible to see when a person, left as well as how long they were in your house. Devices that shut down pipes if there is a leakage or close doors remotely are also abundant.
Whose Data is it Anyway?
It’s the manufacturers of these safety devices, such as alarms and sensors, that have access to the connected home data, not the insurance carriers. It’s imperative that P&C carriers start thinking about how they can integrate or “bundle” themselves with the connected home so that they are not left with the short end of the stick.
Since so many of the services around the connected home are initially aimed at managing risk, insurers could position themselves as pioneers to utilize this data. The benefit of understanding this new customer data is not only the possibilities of providing customized products and pricing, but also the increased frequency of customer contact which will create unique ways to know your customer better. As smart home technology evolves, insurers will have the opportunity to utilize real- time data for the assessment of risk and prevention of loss. By providing discounts and other product benefits and coverage, insurers can attract the best risks to their books and utilize real data-driven underwriting or loss control.
- How do we get this data?
- How do we develop key metrics to collect, assess, and track data quality?
- How do we formulate underwriting/risk scoring to identify and understand the customer better once we’ve opened the firehose of data?
- How do we obtain the “needles” of insight from the hay of data and convert those insights into actions that retain customers, lower loss ratios, create new products, and price them more effectively?
While there are still a lot of unanswered questions around how the connected home will ultimately impact customers and policy premiums the trend of the connected home is here to stay and will change the industry in a myriad of ways.
References: * http://www.techuk.org/connectedhome/