The Internet of Things (IoT)—in the form of devices that automate, monitor and control individual homes—is proliferating at a remarkable pace. Sensors, switches, web cams and thermostats are turning homes into digitized environments, known generally as “connected homes.”
For insurers, the connected home can provide value in the form of new insurance models and products—based on deeper insight into the customer’s needs—and a higher level of customer satisfaction derived from dynamic risk monitoring and improved claims handling. For example, an insurer can provide a homeowner with a recording device to track temperature, humidity, wind speed and mechanical vibrations. This can prevent adverse events from happening and can mitigate their impact when they do occur. The customer benefits from lower premiums as well as the better risk monitoring and quicker action.
Connected homes also create opportunities for insurers to lower costs and improve operational efficiency. Converting this opportunity into revenue from new products (or better margins from lower claims costs) can be a tricky proposition, however. Insurers looking at the connected home face a complex ecosystem with multiple participants, including utility companies, home security providers, telecoms companies, and Internet giants such as Google, all seeking to establish position.
The key to success is in finding the right market entry point as well as the right value proposition for customers. Some insurers have focused on offering customers benefits, including peace of mind and connected control (through digital applications); providing home security solutions—either under their own white label product, or in partnership with a home security provider; and on exploring opportunities in the eHealth and connected car space.
In upcoming posts, we will look at the pros and cons of these approaches as well as what insurers need to do to make their chosen strategy work.
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