Insurance of the future will be smarter

 | February 25, 2019 at 10:00 AM

For as long as most of us can remember, home insurance hasn’t changed. The industry has been complacent at the detriment of homeowners.

Sure, there have been minor adjustments to product coverages and technology integrations to improve internal systems. But it has essentially remained the same; a static product that falls short of adequately protecting homeowners.

Risk, however, is complex and fluid. It’s affected by such factors as weather conditions, ever-changing lifestyles and behaviors. There are technologies on the market — more every year — that can help assess risk more accurately to make families and homes safer.

As insurance providers, we have the opportunity, and I believe the obligation, to leverage new technologies to redefine the role of home insurance into an engaged service that provides more comprehensive coverage and ongoing benefits to homeowners. We are already seeing the beginnings of this. But we’re at an inflection point, and there is more on the horizon.

The name of the game

Insurance is about risk mitigation. It’s our job to not only make sure that people are covered sufficiently, but to support risk-reducing actions and behaviors where possible. If we’re able to better assess and mitigate risk, we can provide a better product that makes homes safer and provides better prices to homeowners, but this calls for a re-calibration of the legacy home insurance model.

Insurance providers are already looking at some data sets to assess regional weather histories and neighborhood safety patterns, but the potential here is much greater. By gathering and incorporating more data sets, including what may be shared from smart home devices specific to a single property and its homeowners, we can more accurately assess risk and provide a policy with appropriate coverage.

To explain how this might work, imagine you have a geotagging program on your cell phone and it can tell that you just left the house, you’re about a mile away now, but it knows that you left the garage door open and it will allow you to close it remotely. Or it’s 11 p.m. and your systems recognize that your front door is still unlocked and the alarm is not turned on. It will prompt you lock the door and turn on the alarm, which are actions that contribute to reduced risk.

This could also turn into vacation coverage. In the same way you notify your credit card company if you’re going on a trip, notifying your insurance provider would let them know that there shouldn’t be any human activity during that time so if it detects water running, it would know that’s not supposed to be happening and would have the capacity to turn it off. This could also mean a lower premium for that period, since there will be reduced human activity in the home and less risk of water damage or bodily injury.

Personalized products

In the past, home insurance has been a top-down, dictated product that homeowners need, usually to secure a mortgage lender, but I see that we’re moving to products that are based on understanding people’s actual needs. We’re shifting from a one-size-fits-all approach to something more sophisticated that can achieve better results.

I think it will be similar to the personalized health care in that we’re using tech to take a closer look at the individual situation to more accurately assess risk and prescribe appropriate coverage. The same is happening in auto insurance too, with companies like Metromile and State Farm’s HiRoad tailoring policies around safe driving insights and factors that are more predictive of accidents, like mileage driven, to offer customers a better product for their driving behaviors/activities.

Eventually, I see home insurance evolving to the point that it will predict behavior changes and adjust accordingly to make homes and families safer and better protected.

Looking to a smarter future

Forward-thinking insurance companies are looking seriously at how they can provide the most convenient and valuable service to customers and they’re building smart partnerships with companies that have access to these devices and an understanding of how or if they’re being used.

The utility of smart home devices will evolve beyond the insurance space as well and we’ll see a combination of several things playing greater roles in home insurance. IoT devices will be more connected to each other and able to converse with themselves and have the capability to be monitored, like a home security system.

If we can support and encourage homeowners to adopt smart home devices and take an active role in upkeep, it will reduce risk and the amount we need to payout for claims and ultimately lead to lower premiums. It’s a true win-win situation. Government regulations are the greatest challenge to progress, but as smart home devices become more pervasive and accepted, this too will evolve.

Posted 11:00 AM

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