Tag Archives: home automation

5 Technologies That Connect to Customers

In the past, customers tended to ignore their insurance after they purchased it. They interacted with their agents only a couple of times a year — to purchase a policy or file a claim — and then they forgot about it.

Now, technological advancements give consumers the ability to connect with their insurance products and services at all times, creating highly personalized services that are in high demand. In fact, 77% of consumers are willing to provide usage and behavior data in exchange for lower premiums, personalized coverage recommendations or faster claims settlements.

The following five new technology trends will change the future of insurance for carriers and consumers alike.

1. Vehicle Telematics

Vehicle telematics transmit real-time data directly to insurers through devices installed in vehicles. As a result, consumers receive more accurately priced premiums and better risk assessment that isn’t solely based on demographic information.

Telematics can also help align your auto insurance premium with your driving usage. This is known as usage-based insurance (UBI). By 2020, it is projected that 70% of all auto insurance carriers will use telematics and some form of UBI.

2. Mobile Health

Mobile health, or mHealth, refers to apps and wireless devices that can be used in healthcare for prevention, treatment and rehabilitation. Both insurers and consumers can benefit from mHealth, and its popularity is demonstrated by the fact that the industry’s revenue is expected to reach $26 billion by 2017.

Mobile health allows insurance companies to sell policies that are specific to their consumers’ health data as well as their adherence to medications and treatment plans. Consumers can use mobile fitness apps to monitor and improve their health, ultimately reducing premium rates.

See also: 4 Technology Trends to Watch for  

3. Gamification

Gamification incorporates different aspects of games to add some fun to the insurance consumer’s experience while solving real-life issues. Insurance companies recognized the lack of customer engagement and have sought to improve this through gamification.

Though gamification techniques are fairly new to the insurance world, they are likely to benefit consumers. Gamification can turn formerly tedious activities — like tracking healthy habits or filling out a health risk assessment — into engaging games that result in rewards and continue to motivate consumers to live healthy lifestyles.

On top of its consumer influence, gamification will be used to improve the workplace. Forty percent of the Global 1000 top companies will use gamification as an incentive and to transform business operations. Keeping employees engaged, especially during a transition, can be highly difficult. Gaming technology is pioneering this issue. In 2012, the gamification market was $242 million. According to a M2 Research study, the market will be $2.8 billion by the end of this year. In other words, we have a lot to look forward to when it comes to interactive engagement as consumers and employees in the insurance world.

4. Drones and Aerial Imagery

While drones are often used as devices for personal enjoyment, they are also transforming the way insurance companies evaluate claims. In the past, insurers needed to visit a physical location to estimate damage and losses. However, drones can now capture aerial images that allow them to more quickly respond to catastrophic events and process claims. Cognizant, a consulting firm, estimates that drones will make insurance adjusters’ work flow 40% to 50% more efficient.

The insurance industry’s growing use of drones will help improve safety practices in the aftermath of a disaster by having fewer people — insurance agents and consumers — on the ground taking photos. Drones also allow insurance carriers to better assess how an event occurred and the resulting damages with high-resolution images from all angles.

5. Home Automation

As consumers continue to adopt smart home technology, from voice-controlled lights to sensors that detect pipe leaks, they will benefit from home insurance premiums that are more directly tied to their lifestyles.

Some insurance companies offer discounts to homeowners who use smart home technology that can decrease their home’s risk of damage or burglary. Smart thermostats, smoke detectors, security systems and deadbolt locks can all improve a home’s safety and can decrease your homeowners or renter’s insurance bill.

See also: How Technology Breaks Down Silos  

Insurance companies will continue to adapt as this technology continues to popularize. More and more homeowners are investing in smart home technology — 45% of all Americans, in fact.

New technology has paved the way for a more personalized experience for insurance customers. As a result, insurance companies are shifting away from transaction-based services and are moving toward building relationships with their always-connected consumers.

Smart Homes Are Still Way Too Stupid

It’s nice to know sharp people — in this case, Rich Jaroslovsky, a former colleague at the Wall Street Journal who is now a vice president at SmartNews. He just wrote a takedown of the smart home that saved me the trouble.

I had visited the topic in a general way a year ago in an article taking issue  with something Google’s executive chairman, Eric Schmidt, had said about how the Internet will disappear. My basic complaint about how even really smart people think about automation is that automation is often more trouble than it’s worth and that people blithely assume I’d like to automate decisions that, in fact, I don’t want automated — no, I don’t want my refrigerator ordering milk for me, my lights to always flip on a certain way when I walk through the door or my TV to always turn to ESPN when I wake up.

Recent stories about the glories of the smart home made me think I needed to return to the subject, more specifically this time — I’m cranky on the subject of the smart home because I’ve been hearing variations on this theme for 25 years without seeing a result; no, Nest doesn’t count. I was prompted into action when I received the following in an email this morning:

“Many large U.S. insurers are bracing for the impact of autonomous driving on their business, but they have yet to grasp that the same trend is at play in the homeowners and renters insurance markets. Insurers that don’t develop a value proposition around the connected home will be forced to give steeper discounts to reflect the lower risks without generating any strategic benefits. Savvy insurers that adapt to the new dynamic have a historic opportunity to become far more relevant than they are today.

“Based on over 100… discussions conducted between November 2015 and February 2016 with smart-home technology vendors; P&C, health, and life insurers; venture capital firms; and technology vendors, this report examines the connected-home use case for the insurance industry, profiles two turnkey smart-home… and mentions 147 other firms.” [I deleted three corporate names in there, including the author of the report, because I don’t see any need to make this personal, even though you’re expected to pay real money for that report.]

Just when I was gearing up to write something on the smart home, though, I saw that Rich had posted his column, which begins:

“With every new smart device I add to my home, it gets a little dumber.

“The thermostats don’t talk to the lights. The security cameras don’t talk to the alarm system, which doesn’t talk to the garage door. The networked speakers talk to each other—but not to the TV sitting a few feet away. Just about every device has its own app for my smartphone, but since none of them work with each other, I’ve got 15 apps controlling 15 functions.”

I encourage you to read the whole piece, especially if you harbor hopes that the smart home is a looming opportunity. As Rich notes, you can’t have a connected home if the devices don’t talk to each other. And while I may have a “standard” for communication, if Rich has a separate standard and so do 87 others of you, then we don’t, in fact, have a standard way of communicating.

We’ll get to the smart home.

But not soon.

‘Smart’ Homes Can Have Stupid Features

Do people want faster response by the police to a burglar alarm, or do they want lights they can control remotely? That is a core question that the alarm industry faces as it undergoes seismic changes. Does the alarm industry sell security, including fast response by police, or does it sell the “connected” home?

Many are leaning toward an emphasis on the connected home. That’s why Google bought Nest, known for its smart thermostats, for $3.2 billion in early 2014 and then announced recently that Nest would buy Dropcam for $555 million. Dropcam uses small cameras to provide security services, though not as the alarm industry is doing. The alarm industry connects cameras to a central station, where feeds are monitored and police notified if there is a break-in. Dropcam uses motion sensors to alert the user to any possible problems; the user then checks the video feed from his phone or computer and, if necessary, contacts the authorities for help.

Whether the alarm industry chooses to emphasize fast police response or follows Google and tries to offer broad home automation solutions, there will be broad ripple effects, including for insurers.

From a risk-management perspective, there are two issues. The first is whether the home automation improves police response and reduces losses. Ultimately, however, the second issue is even more crucial: Do the new home automation services actually introduce new risks and enable high-dollar losses through remote vandalism, including frozen pipes and catastrophic water damage?

Concerning the first issue: At a time when declining budgets are forcing police to reduce the number of officers responding to property crimes, home automation has hijacked a large slice of the alarm industry and is minimizing police response. Catching burglars and reducing property crime has become secondary to lifestyle convenience features and home automation revenue streams.

Increasingly, alarm/security is proposed as just one more feature in home automation. But the new offerings generally use legacy alarm solutions, which have a false alarm rate of 98%. As a result, these alarms are only assigned a priority 3 by law enforcement, so police response is slow, if it happens at all. By contrast, new alarms – based on monitored video feeds, and with break-ins verified — are treated like a crime in progress, a priority 1. Responding officers run hot because they expect to make an arrest.

In an effort to confuse the issue and continue to sell legacy alarms, home automation suppliers sell the ability of the homeowner to remotely view cameras in the home as “video verification.” This claim is exploiting a naïve consumer. Home automation cameras are not monitored by the central station, and they do not provide faster police response. Remote viewing by the owner ends up being a glorified nanny cam.

Unfortunately for insurers, home automation has become the primary message of some of the historical burglar alarm companies, which have reengineered their companies. Security companies are now chasing smartphone thermostats and Wi-Fi-based lighting instead of focus on delivering police response to an alarm.

A joint study by the San Bernardino, CA, sheriff and police departments in 2011 found that the arrest rate for a traditional burglar alarm was only 0.08%. A five-year study completed by Pharmacists Mutual in 2013 found that, when police response was less than five minutes, the officers made arrests 21% of the time. This means that the likelihood of an arrest for monitored, video-verified alarms and priority police response is more than 250 times better.

Video-verified alarm systems monitored by a professional central station represent real loss control tforthe insurer. Video-verified alarms reduce claims. Monitored video alarms actually mitigate losses by delivering faster police response to an actual incident. Police make arrests and prevent the loss itself.

Concerning the second risk-management issue: Home automation introduces new threats for the insurer – catastrophic claims caused by remote vandalism. Imagine the damage to a Minnesota home whose furnace was turned off by malicious hackers while the owners were on a winter vacation. The costs for bursting water pipes and flooding the property for days would make most burglary claims seem paltry in comparison.

The problem is that home automation and the connected home create risks that have not been adequately identified and considered by insurers. Much has been written regarding identity or data theft caused by hackers exploiting weak computer networks for passwords and credit card info. The financial losses from this type of crime have had little impact on traditional property/casualty insurers, but home automation changes the risk exposure because now remote vandals can invade the network and take over the infrastructure and appliances of a homeowner to maximize damage without ever setting foot on the property. Home automation devices become a Trojan horse for vandals, and the more devices are connected, the larger the risk as each device introduces another potential hole.

The press is finally beginning to educate readers about the issue. A July 30, 2014, article in Computerworld headlined “Home Automation Systems Rife with Holes” explains, “A variety of network-controlled home automation devices lack basic security controls, making it possible for attackers to access their sensitive functions, often from the Internet, according to researchers from security firm Trustwave. Some of these devices are used to control door locks, surveillance cameras, alarm systems, lights and other sensitive systems.” Security Today published an article on July 16, 2014, about how hacked light bulbs can reveal a homeowner’s Wi-Fi password and actually give the hackers control over the home automation system itself. This excerpt describes the problem:

“It’s all the new craze: the connected or smart home, where at the touch of a button on your smartphone you can dim your living room lights, close the garage…. But, with sophisticated technology comes risk if you aren’t vigilant in applying the latest security updates to your smart home. In fact, the latest risk involves LED light bulbs that can be hacked to change the lighting and reveal the homeowner’s Wi-Fi Internet password.”

The entire home automation system is only as secure as its weakest link or device – devices that need to be kept updated with security patches as flaws are discovered. Unfortunately, many of these connected home devices are static and not even capable of being updated with new software patches. The connected home is now the Wild West of home security, and property/casualty insurers are likely going to be the ones left paying the bill.

The bottom line is that the home automation industry introduces threats that run counter to the risk mitigation insurers have traditionally found by using discounts to promote monitored alarm systems. In analyzing these risks, David Bryan, Trustwave researcher, states, “Anybody could have turned off my lights, turned on and off my thermostat, changed settings or [done] all sorts of things that I would expect to require some sort of authorization.” The proliferation of devices, protocols, apps and portals mean that the problem is getting more complex instead of calming down.

It is time for insurance companies to review their “alarm discount” and make sure that the discount encourages behavior that actually reduces claims. The alarm industry is promoting home automation to the consumer, but the features and benefits don’t actually reduce risk. Underwriters can reduce risk and minimize losses by encouraging their policy holders to install monitored, video-verified alarm systems that deliver faster police response. Any insurance policy that offers discounts for home automation systems is encouraging new and unexplored risks posed by remote vandalism, and possibly worse.