The Insurer’s playbook on Smart Home

Although most of the early movers into the Smart Home business area concentrated on the development of protocols and industry standards, some issues remain pending, e.g. the lack of Smart Home business services from appliance producers and the lack of communication standards across devices.

For this reason, tech giants who have more recently joined the market are concentrating on compatibility and looking to establish standards by focusing on hub solutions that embrace both hardware and software.

A paradigm shift for insurers

The evolution of Smart Home technology will have significant implications for insurance providers, who will benefit from the enhanced features and abilities of smart appliances / devices by being able to offer risk engineering insights to customers, advanced risk selection, sophisticated and incentive-driven pricing, early (even predictive) loss detection and prevention, and additional home-centred services.

The most significant change for the majority of smart appliances and devices will be the evolution from simply being able to receive remote commands as we do today to much more evolved features in the future, which are likely to include the ability to directly react to external stimuli and take the appropriate preventive actions.

And the new technology will require a paradigm shift in insurance offerings: from the current focus on covering losses to preventive maintenance and loss minimization or downright prevention services. In the end, we expect to see services step into the spotlight and leave the classic insurance products behind, moving insurers towards managing events as well as processes for customers.

There are many touchpoints in the home ecosystem that offer interaction. For most families and individuals, the home acts as the nucleus of their lifestyle. As a result, the home itself reflects the needs, desires and behaviours of individuals, opening the door for innovative solutions that go beyond current insurer offerings.

For mature markets, Monitor Deloitte has undertaken extensive research and conducted a Smart Home survey for the German market to better understand what moves customers to buy Smart Home products and implement them in their home. Findings indicate that one of the key barriers is a lack of trust in the data security of the Smart Home applications.

The question that remains to this point, is how the insurer is actually going to access the market, given that hardware providers currently own the customer interaction points.