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Smart Home

Smart Water Shutoff: The Insurance Play

Moen has recently announced its collaboration with major homeowners insurance provider Farmers to promote its Flo Smart Water Monitor and Shutoff devices through special programs. Lexis Nexus reports these devices offer leak detection, potentially cutting water damage claim frequency by up to 96% and preventing household water wastage by up to 90%. Additionally, Moen offers flat rate installation through a partnership with Frontdoor, Inc’s brand, American Home Shield.

Water damage is a significant and costly issue for homeowners and insurance companies alike. It is significantly more common than theft or fire: Parks Associates data shows damage from water leaks occurring at double the rate of fire or theft events. Despite its prevalence, many consumers do not prioritize preventive measures unless they have experienced a flood. Insurance companies are increasingly focusing on prevention to reduce the frequency and severity of claims. Parks Associates’ discussions with industry experts highlighted that water damage prevention can reduce average claim payouts by 72%, making it a crucial area for insurers.

Insurance companies are also shifting their focus to prevention to maintain profitability. Traditional models that prioritize processing claims are becoming unsustainable due to rising claim costs, leading to increased difficulty of obtaining homeowners insurance — especially in cases of previous water claims. The Insurance Information Institute estimates the average cost of water damage/leaks is $9,633 and $8,625 for flood/weather-related damage. Preventative measures, such as installing smart water management devices, can help insurers cut claims and enhance customer satisfaction.

This shift is also reflected in underwriting guidelines, with some insurers requiring water management devices such as automatic water shutoff for new policies in high-risk areas, such as California.

For insurance companies to achieve compliance, and to increase adoption where leak detection and automatic shutoff are optional, the providers must limit the friction for the end consumer. The interest in self-installation for insurance provided devices has dropped over the last several years. Parks Associates data shows 57% of US internet households with homeowner/renter Insurance prefer that the insurance company installs smart water leak devices and the cost is included in the price of the device kit. Professional installation optimizes functionality, enhances security, and reduces the risk of installation errors that may compromise their effectiveness. Additionally, insurance companies' involvement in installation can streamline the process, making it more convenient and accessible for policyholders.

Moen's approach addresses these challenges by simplifying the installation process and offering nationwide installation at flat rates through partnerships with companies like Frontdoor. Additionally, Moen has updated the product's algorithms to enhance performance, making the devices more effective and versatile. This approach simplifies the experience and makes the technology more accessible and appealing.

Research by Parks Associates revealed that consumers are more likely to remain loyal to insurance providers offering discounts for smart home devices, significantly improving the insurer's Net Promoter Scores (NPS). This finding underscores the value of integrating smart home technology with insurance policies.

These devices can have a much greater impact beyond passive leak detection and shutoff: smart water devices attached to pipes can identify changes in water pressure, usage patterns, and potential freezing pipes, offering critical insights for both consumers and insurance companies. This data is crucial for building predictive algorithms that can forecast and prevent water damage, ultimately reducing claims and enhancing customer satisfaction.

This is an excerpt from Parks Associates’ monthly Smart Home and Security Tracker subscription service. This service provides market intelligence on the competitive US Smart Home and Security landscape by sizing and forecasting the overlapping markets and providing an analysis of key industry trends, market shifts, and player announcements on an ongoing basis.

Market Trends & Competitor News – The monthly report covers announcements from major industry players and highlights the potential impact it will have on the market.

  • It helps competing brands understand how the actions of different companies may impact their own bottom-line.

  • It includes insight on the activity of major tech giants in the smart home space, Amazon, Google, Apple, and Samsung

  • It includes insight on the activity of and the major smart security providers and platforms ADT, Alarm.com, Comcast, Brinks, Vivint, SimpliSafe, and others.

The Smart Home and Security Market Tracker helps companies stay informed with Market Sizing and Quarterly Updates focused on the smart home market.

For more information, please visit our website.

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