Based on expectations that they will increase comfort and convenience, enable remote control of home devices and reduce energy bills, interest in connected-home products and services, including monitoring, control and energy management, is projected to increase to 57 percent from 7 percent over the next five years, according to recent research from Accenture, a management consulting company.
Conceptually similar to connected-car technology, which uses connected sensors to report on usage, behavior, location, status and other data points, connected-home technologies offer a range of conveniences to homeowners and could create new opportunities for P&C insurers akin to those of insurance telematics.
Considering the increase in demand, insurers should begin considering how these technologies could impact the insurance industry, according to “The Connected Home: What does this mean for insurers now and in years to come?” a white paper from Ninety Consulting, a digital consulting company in the UK.
“A viable approach for an insurer could be to enter this emerging market niche by niche, e.g. security applications first, smoke alarms next, etc.,” said Ninety Consulting. “The policyholder of a smart home is perceived as a better risk manager. They are securing their home, thus helping prevent burglary. If an incident such as a water leak happens, they can shut off water flows, etc.”
According to Ninety Consulting, there are 12 common connected home applications potentially of interest to insurers.
The reasons for wanting connected home technologies are diverse. In a survey of 932 adults in the United States, entitled “USA State of the Smart Home Report,” conducted by iControl Networks, a connected home applications company and creator of the Piper Home Security device:
- 86 percent of respondents ranked property loss protection as a top reason for a smart home system
- 78 percent of consumers ranked energy management as one of the top features that matter most in the smart home
- 67 percent ranked personal and family security as the number one reason for using a smart home system
- 52 percent of pet owners listed pet monitoring as one of the top five most important reasons for using a smart home service
Ninety Consulting notes that insurance applications of connected home technologies is still in the early phases, but adds that insurers are partnering with other companies to offer consumer applications.
In May 2012, Allstate Canada teamed up with Rogers, supplier of smart home monitoring equipment to offer a 25 percent discount on their home insurance premiums. Allstate customers also receive a free water leak sensor from Rogers as part of a hardware package that includes a touchpad, three window and door sensors and a motion detector.
State Farm and ADT partnered to offer ADT Pulse, a home security and monitoring technology package to State Farm policyholders. Users receive discounted installation, and discounted insurance premiums and monthly service fees. State Farm also extends discounts to users of IRIS home security products from Lowe’s, a hardware retailer.
North American consumers are leading way in terms of customer adoption, according to Ninety Consulting. At the end of 2012, there were 3.5 million smart home solutions installed, and an estimated 0.7 million of these were multifunction or whole-home systems; 2.8 million were point solutions designed for one specific function, such as climate control or security.
“As some homes have more than one smart system in use, the installed base represents a total of around 2.9 million smart homes,” Ninety Consulting said. “North America was on track to reach an installed base of 5.5 million smart home systems by the end of 2013. Between 2012 and 2017 the installed base is forecasted to grow at a compound annual growth rate of 55.0 percent to reach 31.4 million smart home systems.”
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