Connected devices are changing the relationship between insurer and consumer
Technology has transformed the way that we live our lives – from commuting to work using nothing but a contactless credit card to accessing the internet at any time through our smartphones.
Nearly every industry imaginable has been impacted by technology and changed for the better. However, while many digital transformation strategies have been adopted and implemented at extremely fast rates, sometimes in the insurance industry, things can feel stuck in the past.
A ‘what if’ purchase
Investing in traditional home insurance can often feel like a chore. You buy it, then it sits in a drawer, forgotten until you need to make a claim. It is simply a transaction that takes place because of the ‘what ifs’ in life and – as many consumers never make a claim – it isn’t hard to see why many policyholders switch to a new provider at the end of the year in search of a better deal.
There is no question that this traditional structure of providing home insurance is outdated. However, things are changing, and fast. The adoption of smart home technology by innovative InsurTech businesses is shaking up the industry by providing customers with something they have never experienced in this space – consistently added value. Smart home technology is able to give customers insight into their homes at all times, not just a piece of paper and a promise.
An unbalanced relationship
Home insurance is important. Buying a house is one of the biggest financial commitments people make in their lifetime and it is crucial to have the security of knowing if anything does go wrong, such as a fire, flood or theft, it is protected. Of course, it isn’t just the house itself that holds value – there are belongings inside that hold sentimental and financial value. In fact, according to the Association of British Insurers, the average home now holds content worth £35,000.
Despite its necessity, many consumers are discontent with the dynamic of the traditional relationship between policyholder and insurer. This is the consequence of a number of factors including the complexity of making a claim, the huge amount of data held on an account that is used to determine pricing, the industry issue of loyalty penalties or the imposed excess premiums due to the actions of risky neighbours. There is simply no personal interaction between customer and insurer. Overall, it is not hard to understand why the relationship has become impersonal and tipped heavily in favour of the insurer.
The rise of InsurTech
This is where InsurTechs are making a difference. Smart home technology is already being used by millions of people to enhance their lives. From smart fridges that order your weekly shopping, to smart light bulbs that automatically turn off when you leave the house – these devices are part and parcel of everyday life.
As a consequence, many InsurTechs offer smart home technology such as cameras, sensors and monitors as part of an insurance package. The major benefit is that the devices can actively monitor the household throughout the day and night as well as send notifications of unusual or negative activity directly to a mobile device.
A strong connection
Through smart home devices, homeowners are able to remain connected to their property 24/7, whether at home, work or on holiday. In turn, this constant connectivity instils a psychological shift in householders, encouraging them to take a more proactive approach to home security and protection. The best example of this is minimising damaging through early detection.
For example, while water damage may not top the list of worries from homeowners, it can cost thousands of pounds to repair and is one of the most common types of domestic property damage claims. However, with a leak sensor installed, escaping water can be caught quickly and customers will even be alerted via a notification to their smartphone.
This knowledge is critical, as homeowners are able to call out a plumber on the same day – at a fixed fee – and contain the damage. This proactivity benefits both sides. For insurers, responsible and safe homeowners pose less of a risk, resulting in lower premiums. It’s a win win all round.
Moreover, the additional information gained from the steady stream of signals sent to the insurer from in-home sensors and monitors can allow claim handlers to remain better informed in the event of an incident. This can help to simplify and speed up the process, helping to encourage a more personal and positive relationship between customer and insurer. This information can even be used as evidence – for example footage from a smart camera can catch and record the face of a burglar.
A data-driven relationship
While traditional insurance providers currently still dominate the majority of the market share, their position at the top of the pedestal isn’t secure by any means.
The constant monitoring, proactive alerts and the sense of security provided by smart home technology is the added value consumers are after, making this the future of insurance. Not only does it make the relationship between consumer and insurer more personal, it also makes the whole process of buying and using insurance more convenient and accessible.
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