Smart home: Potential for the insurance industry
Turn up the heating, dim the lights, close the garage door – you can now do all of these things via your smart device or PC. In a "smart home", household appliances and functions can be controlled via the internet. Being "connected" brings a number of benefits for homeowners, for example improved fire protection or electricity savings. And it could also be good for the insurance industry. Smart sensors, for instance, can detect leaking water pipes at an early stage, thereby limiting property damage.
Big players stirring up the smart-home market
Smarter homes thanks to artificial intelligence
The technology behind the IAs is designed to continuously improve its own performance. It gathers and links user data, identifies behavioural patterns and makes adjustments to meet users' expectations better. To do this, it not only takes account of information on the individual user, but also draws on all available data. In the case of Google, that includes search engine activity, communications and calendar content, and Android data if the user uses a pixel smartphone. Amazon links and evaluates, for example, consumption habits and location information to increasingly adapt to the user.
And the learning isn't confined to the underlying technology – appliances can learn too. Thermostats produced by Nest, for example, continually adapt their functions to the user's preferences.
Risks in the smart home
American Modern and HSB are running the LivingWise project to enable them to better measure and evaluate the risks and potential that the networked home will bring. A building has been equipped with networked-home technology so that loss scenarios can be modelled realistically. For example, a sensor can detect water leaking from a pipe, which generally not only involves isolated damage to brickwork, but also affects furniture and fixtures. Such complex losses can be modelled realistically in the LivingWise test environment. The way in which data in smart homes can be used to indicate the cause and extent of damage (from fire, windstorm, burglary, water, etc.) is also being analysed. All of this information can be used in policy generation or provided to insurers wishing to train their brokers.
Smart home – a market of the future for insurers
Smart-home technology creates new – insurable – risks. Sensors, alarm systems and control and communications equipment can incur damage that policies can cover. Appropriate covers are also needed for damage to the mains electricity supply caused by lightning or short circuits. HSB, for example, offers its Home Systems Protection (HSP) household goods cover for appliances and other (networked) equipment, and MyHomeWorks™, which combines HSP with smart home-management tools such as a power-saving service, provides insureds with genuine added value.
As they are connected to the internet, smart homes are also exposed to cyber risks from attacks and manipulation. This creates an opportunity for specialised and liability insurers to offer suitable products. HSB's product range includes Home Cyber Protection™, which provides cover for attacks on smart homes.
Smart sensors enable loss events resulting from fire or burglary to be detected at an early stage and rapidly confined. Ideally, insureds would be able to remedy the cause of damage themselves. If, for example, they used a smart device to stop a leak by closing a water valve, they could significantly limit consequential damage. Insurers could position themselves as "security partners" offering their customers lower premiums if they used appropriate smart-home technology or discounts to the purchase of devices.