Tag Archives: video verification

‘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.

Video Alarms Go Mainstream

Video is now the most popular “option” on alarm systems, a fundamental change for the alarm business. Viewing cameras on a smartphone, known as “self-surveillance,” became a standard feature for all but the most basic burglar alarms.  Now, video is actually being delivered to the central station during an alarm event.  This is the next logical step in security, letting the central station operator verify the alarm and improve police response to deliver greater security.

Instead of just viewing a video of what actually caused the alarms, the central station operator can use the cameras to attempt to see why there was an alarm.  In 2004, when the industry standard was created, video verification was reserved for specialized applications.  Equipment was expensive and cumbersome to monitor.  Nearly a decade later, technology has changed, and video verification is moving mainstream.

IP cameras and specialized camera/sensor devices are now well under $100 and easy to install.  The last piece of the puzzle to fall into place was driving down central station monitoring costs.  Over the past couple of years, central stations have developed affordable video verification processes that fit the mainstream alarm business model.  These central station processes can be applied to a broad range of hardware, from IP cameras equipped with analytics to specialized sensor/cameras designed specifically for video verification.  Third party central stations are offering dealers video verification for as little as $5 over what they charge to monitor a traditional alarm.

Benefits

Contrary to common perception, video verification’s value is not primarily to reduce false alarms. From the property owner’s perspective, false-alarm reduction is more a side effect that “reduces a negative” rather than creating value with additional security.  Consumers looking to purchase “security” want the best security they can afford, and they typically equate this with fast police response.  Video verification delivers faster police response.  Because of historical issues, traditional alarms typically receive a “Priority 3” response from law enforcement.  In contrast, video verified alarms typically receive a “Priority 1” response and are treated as “in progress” calls by responding officers.  The difference in response times between a 1 and 3 is significant.   In Fairfax County, the affluent area around Washington, DC, a video-verified alarm receives response more than 12 minutes faster than a traditional alarm.  From a property owner’s perspective, a lot can happen in 12 minutes in a commercial burglary or home invasion.

Jurisdiction Video Verified Traditional Alarm Response Differential
Boston, MA 7:38 21:00 13:22
Charlotte, NC 5:10 13:30 8:20
Chula Vista, CA 5:05 19:18 14:13
Watertown, MA 4:00 23:00 19:00
Fairfax County, VA 6:00 18:02 12:02
Salinas, CA 2:54 39:25 36:29
Amarillo, TX 10:06 19:24 9:18
Barrie, ON 8:02 16:02 8:00

With reductions in municipal budgets affecting many jurisdictions across the US and Canada, law enforcement has downgraded response to non-verified alarms in an effort to save money.  Sometimes this means a “broadcast and file” policy, where the alarm is broadcast over the police radio and officers can respond if they have nothing more important to do.  Sometimes, police refuse to respond to non-verified alarms at all.  But these same financially stressed jurisdictions all continue to respond to video verified alarms.

The benefits of video verification extend beyond priority response.  A well-publicized court case recently sent shock waves through the alarm business when an industry icon was forced to pay a multimillion-dollar judgment to a woman who was assaulted after she entered her home.  The alarm system had worked.  The motion detector triggered at 10:00 AM, and the central station, after failing to reach the owner, dispatched the police. They found nothing amiss.   Throughout the day, the motion sensor sent in four additional alarms, but the central station was unable to reach the owner on these, as well.  After this rash of alarms, police told the central station that they would stop responding unless the keyholder met them at the home.  That evening, when the owner returned home after work, she was assaulted by an intruder who had been inside her home throughout the day.  This horrific incident simply would not have happened if the central station had been able to see the intruder who triggered the alarms.  Video verification means greater security because the central station operator becomes a remote eyewitness to the alarm event.

Monitoring

VideoWhen the industry standard for video verification was created in 2004, self-surveillance on smartphones was not even on the radar. Apple’s first iPhone did not even hit the market until 2007.  The early video verification process required the central station operator to manually access a camera/DVR when an alarm triggered and download the video for review.  This often required working with static IP addresses, firewalls and video management systems that were isolated from the central station automation software that ran the business.   All of this required specialized operators who were trained to manage video and operate multiple video systems remotely.  Technology changed all this.  Video verification is now done by the typical operator in the central station.  Central station automation like MAStermind, Bold, Dice, MicroKey, SIMS, and others have integrated video verification into their standard alarm processes.  In addition, there are third party solutions like I-View Now that enable any central station to do video verification without changing their automation software.  These central station solutions work with a wide variety of hardware, from IP cameras to specialized camera/sensors devices designed specifically for video verification.  Just as smartphones and mobile apps changed the lives of consumers, the central station solutions for video verification have made monitoring video alarms simple and inexpensive for the typical alarm dealer.

Market Penetration

Self-surveillance and home automation have created a paradigm shift in the alarm business affecting even the most basic alarm offering.  Declining video hardware and monitoring costs mean that video verification now fits the competitive business model of $99 down and a multi-year contract that finances the hardware/installation.  Commercial applications have been the first to embrace video verification.  The newest generations of hardware and monitoring services have finally reached the pricing level necessary to move into the competitive residential market.

Partners

Grand Prairie PoliceThe alarm business is built upon a partnership with insurance industry and law enforcement.  The insurers encourage their policy holders to install alarm systems to reduce claims and prevent loss.  The alarm industry depends upon law enforcement to respond to their alarms and protect their customers in the event of a burglary or intrusion.  Video verification is already strengthening this partnership. The insurance industry has taken notice of priority response and what it means to them in terms of reduced losses.  In January 2013, Pharmacists Mutual Insurance published the results of a five-year study that linked arrest rates and losses experienced to police response times.  Other major insurance companies like Hanover, CNA, Allstate, and State Farm are working on updating policies to encourage their policy holders to move to video verification.  While this is a slow process, the insurance industry has begun to turn the rudder, and the ship is in motion.

In the past decade, video technology has fundamentally changed law enforcement with cameras in patrol cars and on highways and even portable cameras worn by officers.  Law enforcement depends upon video, and video verified alarms are another step in this direction.  While law enforcement understands video verification means fewer false alarms, they also know that video verified alarms mean more arrests.   Officers have always been motivated to “catch the bad guys,” and video verification helps make this happen.

As Chief Steve Dye of Grand Prairie, TX, explained to the IACP committee on Community Policing in a recent presentation, “From our perspective, we see no difference between an eyewitness calling to report a crime and a central station operator calling to report a crime they have seen on video.  In fact, the fact that a video exists of the actual event could mean the central station call could even be considered stronger.”  Chief Dye is promoting priority response to encourage his citizens to install video verified alarms to help him in the battle against property crime.  It is making a difference. Currently, the response time for a video verified alarm in Grand Prairie, TX is less than two minutes.