More service, better control, customized insurance products: Smart home, the Internet of Things (IoT) in your own home, creates new possibilities for insurance companies.
According to a survey from the digital association Bitkom1, every fourth German household already owns a smart home-capable device. By 2025, over 25 billion such devices should be networked throughout the world22 Smart lights, video surveillance and speech assistance are most popular. In particular heat thermostats as well as alarm or lock systems are in demand for planned new purchases1. What the most popular products have in common is the topic of security. And that is exactly where insurance companies can expand their core business.
Predictions are becoming more and more important
For insurance companies, it will be of increasing importance to appropriately react to the conditions in the area of property and special insurances made more difficult by the climatic changes. Based on the questions what exactly happened and what happened previously until now, prediction methods must be developed that provide statements about which damage will occur where and with what probability. A look in the past can be determined using classic business intelligence reporting elements from databases. A look into the future, however, is significantly more complex.
Whether water damage, fire or theft, the insurance company can minimize damage using the data from networked houses and apartments. A “Smart Insurance”, for example, can be used if somebody isn’t home and the connected sensors cause an alarm through a smart phone. The alarm is directly forwarded and, depending on the desired options from the insured individual, an initial backup or inspection on site can be performed. A service that is offered by, for example, Allianz in cooperation with alarm systems from Panasonic.
In combination with Predictive Analytics damage can be predicted or even prevented. This is good for the insurance company and the policyholder. On the one hand, more attractive insurance contracts can be calculated; on the other hand, insurance companies can offer more lucrative insurance products. A start up that specialized in the future prevention of damage in connection with artificial intelligence is the American company One Event Technologies. With the aid of a cloud-based predictive analytics engine and ambient sensors, the manufacturer claims the device can predict fires or even floods at a house - 20 minutes before they actually happen.
Furthermore, the insurance company is able to examine using smart home data if the policyholder complies with the conditions for insurance coverage - at a low cost. To do so, the times that objects are used or the present conditions - temperatures, time of day or geographic positions - can be used. The Insurtech Beam Dental uses this kind of data. The start up uses IoT toothbrushes and can offer lower cost dental insurance.
Getting to know customer needs
Furthermore, the collected data can be used to determine the specific customer needs. Insurance companies can point out new risks and create new individual service offers based on this. The smart home topic in general is a win-win situation for insurance companies and insured parties. Both parties profit from the new technology. It is a great chance for insurance companies to develop new services and products for smart homes.
1 Digital association Bitkom: Survey of 1,611 German citizens 18 years and older regarding smart homes
2 IHS Quarterly, Q1 2014, The Internet of Things Episodes