A growing number of insurers are following suit, partnering with smart-home technology companies to prevent and manage claims while also enhancing their value proposition, says Jennifer Kent, vice president of research at Parks Associates — a global market research firm that specialises in the analysis of IoT residential products.

“We do feel like we’re at the point where we’re starting to see some of the major [insurance] providers step into the market in a more real way,” she says.
Kent points to United States insurer State Farm’s US$1.2 billion equity investment in home security leader ADT. When the deal was announced in 2022, State Farm’s chief operating officer Paul Smith said it would enable the insurer to “provide smart-home technology that takes us from our ‘repair and replace’ model to a ‘predict and prevent’ mindset”.

So far, data from Parks Associates shows that US consumers are favouring smart-home technology such as video doorbells and cameras, which not only deter theft and intrusion but also generate evidence that can be shared with insurers in the event of a claim. However, uptake of products that stand to have the greatest impact on claims — such as smart leak detectors — is still low.

“But now that we have these partnerships, we expect to see more data emerge around which homes have which types of devices and whether or not claims are being impacted in a positive way,” says Kent.

Proof that the technology delivers value will likely give rise to more tech–insurer partnerships, she adds, as will insurers’ efforts to maintain the affordability and accessibility of cover, particularly as extreme weather events drive premiums up.

“I think anything that can help turn the tide on profitability, or that can keep insurance somewhat more affordable, will be something insurers strongly consider.”

Kent says insurers must ensure that the data that claims teams collect from smart devices is properly protected and used responsibly to maintain customer trust.

“Insurers need to be very transparent about how they handle the data,” she says.

“They should also clarify its terms of use. For example, if a leak detector battery runs out without the customer knowing and a leak occurs, will the claim still be paid? Customers will want to know that the devices won’t put them at a disadvantage; they want to trust that their insurer is going to treat them the right way knowing they have these devices in their home.”

Despite challenges, there’s certainly appetite for the technology, with a recent Parks Associates study finding that one-third of US internet households with homeowner’s / renter’s insurance would switch providers to acquire smart devices.

This represents a major opportunity for insurers, says Kent. “Customer satisfaction goes through the roof when smart-home products or associated discounts are offered. Customers who received a discount for smart-home devices from their insurance provider gave them an NPS [Net Promoter Score] of 31. Those who don’t receive any sort of discount rated it a 10.”

According to Kent, increased uptake of smart-home technology allows insurers to reduce risks, enhance customer engagement and differentiate themselves in the market. “It’s a win–win strategy that benefits the insurance industry and homeowners seeking enhanced protection and peace of mind.” 

From the article, "How insurers are using smart-home technology" by Beth Wallace