Smart Home Telematics
New opportunities for forward-thinking insurance providers
Abstract
This whitepaper discusses the challenges and opportunities the insurance industry faces in the context of Smart Home technology. It also describes the potential benefits of Smart Home Telematics programs and outlines a plan that forward-thinking insurance providers can consider.
Everything is Connected
...and that changes everything
The advent of the smartphone ushered in a period of constant personal connectivity, and we are still experiencing the change it has wrought – from how we communicate with each other to the way customers expect their service providers to engage with them. Moreover, the pace of this change is accelerating, and customer demands continue to increase, to the point where constant contact and immediate responses have become an expectation. With the proliferation of Internet-of-Things (IoT), this connectivity is now spreading from the virtual front of instant messaging and notifications to the physical domain of connected devices.
On average, US households now have a total of 25 connected devices, increasing from 11 devices as recently as 2019, according to Deloitte. This rapid technology adoption changes customer expectations and the definition of connectivity. From on-demand communication (phone calls, text messages) to push notification-influenced lifestyles (Facebook, Twitter), customers expect instantaneous feedback not only with their personal contacts, but also with their service providers. Organizations can now use data analytics to better understand their consumers, leveraging real-time data from in-home devices to provide personalized services.
Growth of the Smart Home
The Smart Home is growing quickly and shows no signs of abating. Currently, over 57 million smart homes exist in the United States, representing a penetration rate of 43 percent, with ‘Control and Connectivity’ being the most important drivers according to Statista Research.
US Households Using Smart Home Devices (2018-2025)
| Year | Number of Smart Homes (in millions) |
|---|---|
| 2018 | 29.5 |
| 2019 | 40.5 |
| 2020 | 48.0 |
| 2021 | 53.8 |
| 2022 | 57.4 |
| 2023 | 60.4 |
| 2024 | 62.4 |
| 2025 | 64.1 |
Between 2019 and 2021, the number of smart homes in North America grew by 18.7 percent year-on-year. Grand View Research anticipates a CAGR of 27% from 2022 to 2030, with a market size of $537 Bn expected by that point.
The Opportunity – and The Risk
The growth of consumer IoT is poised to change both the way people live and their demands of service providers. Acceptance of connected devices is growing fast, and service providers are facing a changing customer landscape. The opportunity stems from the ability to interface with customers in more ways than ever before, while the risk encompasses the quick disruption enabled by technology, resulting in increased competition from tech giants and other players.
53% of seekers would consider a non-traditional home insurance provider like Apple and Google (Source: NTT Data).
The Connected (Smart) Home
Connected devices are disrupting every nook of the home. The Smart Home describes a vision where devices and sensors communicate with each other and services that keep the customer connected to their home from wherever they are. Automation and automated learning support interactions that benefit consumers by making their lives more comfortable and providing contextualized, actionable insight.
Primary Smart Home use cases
- Automation & Energy Management
- Media & Entertainment
- Security
The Smart Home market is likely to remain fragmented for the short and medium term, but with trusted companies like Apple, Google, and Samsung providing better and less expensive devices, adoption will increase.
Business Opportunities
...for forward-thinking insurance providers
Incumbent property insurance providers face increased competition due to commoditization and fast-moving disruptors, creating a need for business innovation. Connected home technologies are well-positioned to address both emerging provider-facing and customer-facing needs.
Mutual Homeowner Provider Benefits
- Fairer rates due to higher visibility
- Quick or automated responses to critical events in the home
- Overall increased insight and safety of insured assets
- Better communication lines between provider and customer
What do insurance customers want?
- 45% Responsive service
- 37% Information provided the way they wanted it
- 34% Recommended policy best for their needs/budget
Key Concept: Meet the customer where they are (and where they are going).
The Power of Contextual and Actionable Insights
Insurance is a data-centric industry, and Smart Home data must be contextualized and made actionable. In a Smart Home environment, multiple sensors may transmit data continuously, providing insights that can be reacted to or acted upon by homeowners and service providers alike.
Key considerations include:
- Put the customer first
- Offer tangible value
- Play outside the box
- Acquire new customers
Conclusion
The property insurance industry faces intensifying pressure due to a dynamic landscape as well as changes in customer priorities and needs. Property insurance incumbents must leverage connected devices to create a branded Smart Home customer experience that provides mutual benefits through insights and control, enhancing relationships with customers and supporting the promise of helping them live better.