Canadian insurers’ interest in smart home technology is rising. At one level, this is providing new, cool insurance programs. At a higher level, this is a prototype of Insurance 2.0.
Home, Dry Home …
According to CB insights, Intact Insurance in April “became the latest insurer to invest in a smart home startup – water and flood monitoring company Alert Labs.”
This followed an announcement by Desjardins that it was partnering with Roost to supply smart water leak detectors for free to its policy holders.
And the rises in these technologies run parallel with development of sparking new coverages. In March, The Guarantee a new endorsement to its Guarantee Gold Homeowners product, H2O+, which, according to the carrier’s release,
“is designed to complement their suite of residential products, offering complete water protection for all policyholders. Addressing the gaps in coverage many Canadians face related to the growing risk of unwanted water, this new endorsement covers fresh water flooding, damage caused by ground and surface water, and damage caused by waterborne ice.”
The Guarantee has established partnerships with technology and data providers to assist in pricing and bespoke underwriting.
There is something going on here …
This is part and parcel of a much larger trend in the insurance industry: derisking. For our purposes here, this means that tools or techniques that allow us to avoid risk completely, or mitigate the insurable impact of the risk, also allow insurers and customers to enjoy lower costs.
The only issue is that as risk is at the core of the insurance product and industry if there is No Risk, there is also No Product. And, at the extreme, there is No Industry.
Given the width and breadth of risk in our times, the extreme is some way down the road. That said, the accelerating pace of technology could create more disruption than some insurers can absorb.
For example, we have adjusted to reports that suggest automobile insurance premiums could drop 25% in the next decade or so. However, writing in PropertyCasualty360, CapGemini’s Keith Gage and Tom King from PegaSystems cite the World insurance Report 2016 suggesting “that the value of claims relating to risk is set to suffer a potential loss in value of 20 to 40 percent, which could have profound implications for insurance demand and premium income.”
Gage and King are part of a growing group who suggest that, assuming we don’t want to take insurance into run-off, we need to create Insurance 2.0. Insurers that have started to metamorphose have realized that there is a common success factor: a change in the relationship with the insured.
Gage and King write:
The new normal of insurance will look very different from today’s model, and a significant change of mind-set will be required if insurers are to truly benefit from the more proactive approach of Insurance 2.0. Where they might once have only had one interaction with a customer every year — perhaps at premium renewal — this model must change so that insurers become relationship-focused every second of the day.
And there is a roadmap for consumer engagement traffic: the Internet of Things (IoT).
Gage and King give a practical example: “an insurer will be able to monitor water activity in an industrial property, and provide advice on any chronic performance issues via immediate alerts.”
What do you think?
Are you and your company ready for Insurance 2.0? Are your customers? The pace of change is being driven by the latter, not the former.