In the last year, two our of five insurance firms have invested in some kind of program with a connected device maker, according to research from Accenture (ACN). What’s more, 45% of all insurers feel connected devices will be a driver of revenue growth in the next three years. This is awesome for the makers of connected devices, because consumers still aren’t buying these gadgets en masse.
Despite the three years or so since many of these devices have come on the market, it’s still an early adopter game, with most normal consumers wondering why they would spend $250 on a connected thermostat that obviously still has some kinks, or light bulbs that are 6 times the price of existing LED bulbs and don’t seem to offer much beyond changing color. That’s a toy for rich folks, not a need-to-have device.
The industry has stalled. But while consumers are scratching their heads, property and casualty insurers have been testing connected doorbells, water sensors, smoke detectors and dozens of other devices. On the life insurance side, wearables and other devices are also in the R&D labs, although that’s less of a focus for this story, since consumers have tended to adopt wearables more readily than the connected home concept.
On the P&C side, State Farm is launching a program that will give an all-in one connected security device called the Canary to first responders soon. Last month, American Family created an innovative program with connected doorbell provider Ring, that offered customers a discount if they bought the device, but also would reimburse your deductible if someone managed to break in. American Family also subsidizes the cost of a Nest Protect smoke alarm. USAA has backed a connected car startup called Automatic, while Progressive (PGR) has already teamed up with Zubie, another connected car device maker, to deliver discounts on auto insurance for drivers who share data.
For insurance firms, the decision to back these startups can range from helping to prevent losses, which can boost profits, and helping make the insurer a more positive and proactive presence in people’s lives. Ryan Ryst, director of innovation at American Family, says that in creating programs around connected devices, an insurance company has a chance to remind people that insurers are acting to protect policy holders.
“For most people insurance a necessary evil, but with digital experiences and a well-planned strategy it’s not about finding the lowest price, it’s about protecting people’s dreams,” Ryst says. “What role can we play and should we play that’s not creepy. That’s not sucking a bunch of data but that is adding more value? 90% of our customers never file a claim so what can we offer them?”
Ryst envisions an Amazon Echo reminding people to change the batteries in their smoke detectors or their furnace filter when it’s time. Or maybe occasionally reminding people of best practices about keeping their home safe. Heather Paul, a public affairs specialist with State Farm, has a similar vision. She points out that insurers have a wealth of data about keeping your home safe from fires, floods, and burglaries. Finding proactive ways to share that with policyholders could help, even if it’s something as easy as reminding customers to set a timer for their lights before they leave town for the holidays, or even getting permission for the insurance company to randomize that light timing for them.
Of course, as insurance firms dive into the smart home, there are some questions that arise: About privacy, how they can and should use the data, and even if the state departments that currently monitor insurance companies are ready to think about how to incorporate connected products into underwriting decisions. Most insurance companies are tackling these questions, along with detailed pilot studies of connected devices, as they try to understand what they might want to offer customers and what holds the most value. In the meantime, they are also proving to be active investors in the smart home sector and key beta testers of the technology.
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