As inexpensive sensors and ubiquitous connectivity are more frequently built into consumer goods, some insurers are beginning to apply these technologies, frequently referred to as the Internet of Things, to risk management and mitigation.
Having recently launched its Prestige Home Premier service, Fireman’s Fund, a specialty insurer serving high net worth individuals and offering entertainment and commercial insurance, is among the early adopters, using these connected devices to reinvent homeowners’ insurance.
Don Culpepper, risk management consultant for Fireman’s Fund, met with Senior Editor Chris McMahon to discuss the state of the technology.
INN: What is Prestige Home Premier, and how does it relate to the Internet of Things?
Don Culpepper: I describe it as risk management for personalized insurance. I work with clients or their offices to help them understand the various components of the home in terms of protecting them from possible loss or damage and make recommendations for how to better utilize technologies, perhaps by bringing in a third party company to assist with that.
INN: Please give us an overview of the IoT technology your customers are using and how Fireman’s Fund has gone about making it all real?
DC: I work with our ultra-high net worth customers, and I’m a part of our select accounts specialist team. Typically high net worth people are first adoptors of technology, and these are high-end homes. Integrated smart-home systems can be controlled with smart phones or other types of devices. They can control automated door lock and security systems, control the temperature, the ventilation systems, monitor energy consumption, control all the audio and visual systems within the home, as well as smart-lighting systems. If they enter a certain room, they may have that program provide a certain level of lighting at certain times of day. Smart appliances, which I’m sure you’ve seen on television, can be set to start cooking a particular meal at a specific time; the refrigerator can tell you when you’re low on a certain item, or if an item appears to be spoiled. All types of interconnected devices can provide ease of use as well as provide safety and security for the family.
Our sole purpose, at least from my perspective, is to get an understanding of the nature of the connectivity within the home and determine how that connectivity can be used to mitigate risk or damages within the property. For example, if you’ve got exterior cameras, do those cameras have night vision? Secondarily, if they are accessed via a smart device, is that device encrypted or password protected to keep someone from hacking into the device?
One of the concerns is with all the hacking that has occurred at various corporations throughout the country. A lot of people now are blurring the lines between home and work. They’re taking data home with them on their smart device, laptop, etc. We assist the homeowner in understanding how to lock down those devices, so that you don’t get the 15-year old with a laptop driving by deciding that they want to open up your garage door, turn off your refrigerator or harm your family. Our goal is to help clients understand the risks and to mitigate them as much as possible.
INN: All these devices come from many different vendors. Who’s doing the integration? How are you tying this all together?
DC: A lot of companies are providing this type of integration: Control4, Crestron Electronics, Savant Systems, these are smart-home companies and they will wire, or even wirelessly integrate, audio/visual systems with home-security cameras and systems. A lot of these things can be integrated with Bluetooth. It involves a lot of programming time [laughs].
INN: What services is Fireman’s Fund offering based on having access to all this data?
DC: I work in the risk services area of our company, and one of the things we do when we meet with clients is to on a pre-built basis, or when a home is being renovated discuss these types of technologies and how they can be used to help protect the home.
One of the things we look at is preventing or mitigating water damage. There are systems that can be installed within the property that can sense water in certain areas of the house. That system can then be programmed to provide an alarm to a specific person, whether it’s a plumber, property manager or the insured, and then, if the alarm goes unanswered, shut down the water system after a specific period of time. You end up with something you can clean up with a mop as opposed to having to move out of the house for three or four months, while water and mold damage are repaired.
INN: This is available today? It’s not some sort of proto-type?
DC: No, it’s been around for a few years. There’s what’s called a point-to-point system. You can put devices in certain areas, such as the laundry room, behind a toilet or air conditioning condenser unit, or in certain areas where water can potentially infiltrate the home. Or you can do a whole-house system, where it would be attached to your main water line and monitor it based on your normal water usage. When the system senses anything over and above what is considered normal for your household, it would sound an alarm that there may be an issue within the property. About 85 percent of our claims are water related.
Something else we offer is a walk through of the insured’s home with an infrared camera. The camera is designed to interpret heat reflected from surfaces. What we’re looking to determine is whether there are any out-of-the-ordinary temperature ranges. If, for instance, the ambient temperature in the house is 72, and we see an area of the house that is registering at 56 other than an air conditioning vent or something of that nature then we will then use a moisture meter, which is non-invasive, to determine whether there may be some moisture infiltration. We can then, potentially, work with the insured to prevent a large possible loss from water infiltration.
INN: What does this cost?
DC: We work with individuals in the upper 5 to 10 percent of wealthy individuals. These are going to be names that you’ve seen in the paper, and we’re providing an additional measure of security and safety for that client because they have other more-important things to do as opposed to wondering whether their insurance is going to provide the necessary coverage for all the things that they have.
INN: So cost isn’t their most important consideration, I guess. How long have you personally been working on this kind of project?
DC: I’ve been in this position for the past 14 years and during that time frame, we’ve seen this technology evolve from a simple brain that can control a few devices to an automated system that can control the entire house.
INN: What’s the biggest misconception that you have to address when working with one of your customers?
DC: Well, early on it was that I was there to raise their rates. My actual job is to try and protect that person or that family as best I can. We can always replace all of the whiz bang things in the house, but we can never replace the family.
By making sure, for instance, that there is a panic alarm close to the bedroom, so that they don’t have to run down the hallway to get someone or alert someone in the event of a fire. Secondarily, I try to make them aware of the cyber dangers that exist—from inadvertently revealing where your children go to school on social media, to having your systems hacked and your data stolen—things of that nature.
INN: Are there misconceptions concerning the technology?
DC: People don’t realize how much is out there. Just look at the website for the Consumer Electronic Show to get an understanding what technology is available. You would be surprised as to what can be done in your home. A definite misconception is that certain things are not viable at this time.
INN: What’s the one thing that you want somebody to know or consider with regards to Internet of Things and property and casualty insurance?
DC: The Internet of Things is a great advancement in terms of how you can interconnect devices, appliances, computer systems and anything you have that is a part of your home. However, you want to keep in the mind, even with these great advancements in technology, you still have to look at risk mitigation and look at it seriously particularly with so many people out there hacking, trying to get information, trying to perhaps do you or your family harm. You need to understand what the risks are and how they can be mitigated. For instance, if you get a smart-home system, it comes with a default password that may be 1-2-3-4-5. You would not believe how many people never change that password. So, there are simple things that you can do to mitigate the risk for yourself and for your family.
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