20th September 2016

Thanks to the evolution of the internet of things, increasing investment in high-speed broadband infrastructure and the rise of smartphones, connected home devices are seeing increasing use. In fact, PricewaterhouseCoopers predicts that the connected home market could be worth almost US$150 billion globally by 2020.

One only needs to look to the launch of the Amazon Echo (a voice-activated smart home hub device) in the UK and the plethora of smart appliances and connected gadgets that took centre stage at this year's IFA consumer electronics show in Berlin, to see that connected home technologies are becoming part of the mainstream.

Through existing software, insurers are already able to take advantage of connected home technology, integrating connected devices into existing telematics hubs that can be used to alert insurers of major incidents or communicate advice to the consumer.

Connected home technologies have great potential to improve a household insurer's product offering and minimise claims losses through monitoring and quick response times. One connected home insurer due to launch in 2017, Neos, already offers a smart technology insurance package including an alarm system, camera, smoke and water ingress sensors.

Not only can increased communication between smart devices offer consumers greater security and peace of mind through real-time alerts, it enables retailers to more accurately monitor, insure and, in some cases, prevent risk.

One example is the iSmartAlarm, a connected security system, sets off a panic alarm and sends a text message alerting the user to any breaches in security, as well as enabling them to survey the scene via a connected camera to evaluate the situation before calling the police. As well as offering the customer enhanced security, insurers can benefit from this system's ability to mitigate losses and increase the likelihood of criminal apprehension.

Connected home devices also promote risk mitigation through encouraging changes in customer behaviour through notifications, reminding users to perform actions such as locking the door or activating an alarm. Another example may be if temperatures are below freezing and a customer has not yet turned on their heating system, insurers can notify the customer to do so in order to prevent cracked pipes and future flood damage.

The rise in smartphones and apps using and sharing personal data have led to a generation of consumers more comfortable with sacrificing privacy for potential benefits. According to research from Accenture, 78% of insurance customers would be willing to share personal information with their insurer in return for lower premiums or a quicker claims settlement.

Not only does connected home data provide deeper insights into customer needs, it contributes to greater transparency, speed and convenience during the insurance shopping and claims experience, leading to higher customer satisfaction in the long run.

While adoption of connect home technologies is increasing, the key to greater uptake will be that consumers are made aware of the wide-ranging benefits of the technology, and that the insurance industry is able to incentivise use of smart home gadgets through improved premiums and other benefits.