The Internet of Things (IoT) is changing the world we live in and insurance is no exception. Insurance companies are already partnering with IoT manufacturers, despite lagging behind other industries such as retail, automotive, transport, electronics, banking and telecom with regard to IoT adoption.
Some examples: Liberty Mutual teamed up with Google Nest to deploy smart smoke detectors. Erie Insurance uses drones for claims inspection. American Family Insurance partnered with Ring to make homes safer. American Modern offered free water sensors to their clients to detect water leaks and prevent them from causing more damage.
Decreased Premiums and Custom Coverage
Smart homes are safer homes. But how does that impact your insurance premiums?
Better home data means better data modeling to predict claims. That can translate into lower premiums for some people. But more to the point, it means the beginning of an age of bespoke insurance, or custom policies. Connected devices hold the potential to create more intimate relationships between insurer and insured. This doesn’t just mean custom-tailored policies. It also means a decreased risk of fraud, which benefits all consumers.
Automation and IoT technology also means a simplified and less expensive claims process —to the tune of 30 percent. This can result in premiums going down by as much as 25 percent. Another way that IoT devices can decrease premiums is through fewer claims. IoT devices make homes safer, so it follows that a connected society would be one with fewer claims. After all, a house that can call the fire department for you while you’re on vacation is far less likely to burn down.
Better Insurance With Greater Protection
Beyond lower insurance premiums, IoT devices open the possibility of greater understanding of how customers use insurance. This means that you will likely get more coverage (or at least, more tailored and thus better coverage) for your insurance premium.
When you share data with your insurance company, it can ensure that your security devices are being used properly, adding an additional layer of protection. Indeed, the future might see insurance companies moving into a new space where they are both insurance underwriters and home monitoring technology salesmen, helping consumers to find the most robust methods of protecting their homes. More than just fire and theft, homeowners’ insurance companies can help you keep abreast of, for example, the health of the HVAC systems in your home through advanced, connected sensors.
Nor will the technologies be limited to homeowner’s insurance. Auto insurance providers have long used dash cams to lower premiums for customers who drive safely. Wearables will alter the future of health insurance as well.
The Downsides to Smart Technology
All these conveniences —and the lower premiums for responsible consumers that come with them —will surely be a benefit; however, they come with informational security concerns. Customers will no longer simply compare prices and benefits. They will also have to look into privacy policies and what underwriters are doing to protect their data from the prying eyes of hackers and other cybercriminals. Your information will be valuable not simply as a means of identity theft, but as a rich mine of data for burglars. And, of course, some consumers will choose to pay more and remain off the grid.