The rise of the Internet of Things ecosystem is changing the competitive landscape for insurers and their business partners. We are seeing this most notably in the P&C sector, where the connected home is being taken seriously by carriers that recognize the opportunities inherent in including value-add devices as part of a homeowner’s or renter’s coverage limits.
The best part: It’s an example of the insurance industry being a first-mover. According to Fortune, prices for home-based connected devices are still considered too high for the average consumer, causing the industry to stall. Whether it has stalled or is simply in the early phases of growth seems irrelevant to the insurers scrambling forward with a variety of moves to create value from IoT devices related to their offerings.
But some of the largest insurers are working with utility and telecom providers, as well as home security technology providers, to create packaged products for the home. Although some are doing so using a white-label approach, according to Accenture, two out of five insurers that provide homeowners or auto insurance invested openly in programs with a connected device maker in the last year, and 45% of the insurers surveyed believe connected devices will be a source of revenue growth within the next three years.
Many insurers, notes Forbes, are also investing in R&D related to the devices themselves, such as connected doorbells, water sensors, smoke detectors and dozens of others.
Last summer State Farm teamed up with home security device provider Canary, which provides a smart home monitoring solution that enables the user to see and hear what's happening using wide-angle HD monitoring, high-quality audio, motion detection, as well as temperature, humidity, and air quality readings. Qualified policyholders receive special discounted offers on Canary products as well as premium discounts for participating. A similar pitch, launched in November 2015 from American Family, offers qualified homeowners and renters premium and product discounts on an IoT-connected video doorbell, which acts as a peephole when used with a smartphone.
In London, one company is about to launch the first smart-home insurance policy that includes 24/7 home monitoring hardware and services as standard. Neos Insurance (Neos Ventures) supplies motion and leak detectors, smoke alarms and window contacts, as well as other smart devices, which monitor key locations in the house and alerts the policyholder via the Neos app if something troublesome occurs. Matt Poll, the company’s founder, has stated that policyholders must take the insurance/monitoring tech as a package, making any of the homeowner’s existing devices unusable with the Neos policy. Like other insurers with more traditional models, Neos says it will not use policyholder data without permission. Its Beta release is scheduled for June, and pricing schedules have not been published.
Admittedly, the industry faces myriad challenges related to the data that will be collected by these devices, data ownership issues, pricing, risk and claims issues to name a few. But like any new technology-enabled business model, challenges are meant to be overcome.
The good news is that, because IoT-connected devices have not yet been classified as a commodity, the market will continue to grow, especially as prices for various devices drop, which will positively impact both insurers and customers. Meanwhile, time is needed for all three examples above to determine which business model, which package and which offer with the greatest value-add appeal will win. One thing is certain: It’s refreshing to see insurers, which already offer commodity products, acting as a first mover for a change, leveraging a window of opportunity as the device market matures.
