The Internet of Things (IoT) is a growth market for insurers. By 2025, it is estimated there will be over three billion wearable technology devices/sensors, telematics will have significantly impacted the auto market and half of all U.S. homes will be connected to IoT devices.
In the here and now, though, some analysts have expressed concern about the connected home’s sluggish start. “Compared to the connected car, the connected home is a less mature, less certain and more complex insurance market,” according to PropertyCasualty360.com.
The connected home is still an early-adopter proposition in terms of consumers. Should insurers be worried about the smart home market?
“We’re seeing increasing interest among insurance carriers in the smart home or smart facility type of opportunity,” wrote Tony Jacob, Microsoft’s managing director of Worldwide Insurance, “where a growing collection of home automation devices, from internet cameras and motion sensors to gas and water leak detectors, is providing data and insights that can inform insurance products as well as value-added services.”
Part of this interest (and investment) can be explained by the obvious long-term potential of the market. Connected home devices, such as electronic door locks that include fingerprint scanning and remote-locking based on authorization; water alarms that automatically shut off water supply to home water tanks and heaters when there are leaks or problems; and external sensors that accurately track wind speed and vibrations; will reduce insurers’ investment of time, effort and financial resources.
But there are also important short-term benefits, including increased customer loyalty and a strengthened company brand.
“For insurance firms, the decision to back (connected home) 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,” according to Stacey Higginbotham of Fortune magazine.
To set themselves up for success in both the short- and long-term, insurers will have to navigate a quickly evolving market to decide which connected home market leaders to partner with. This will likely require an ecosystem comprised of partners from different domains and an agile IT infrastructure to cope with new developments.