By Donald Light, Director, North America Property & Casualty Practice, Celent —
Insuring connected homes has three pretty good value propositions:
- The insurance industry can show policyholders and society as a whole, that it does more than collect premiums and pay claims
- A connected home may have fewer or less severe losses — i.e. impacting the loss ratio via loss prevention and loss mitigation
- An insurer can use data from connected home sensors to develop better products, to price more accurately, to underwrite more effectively, and to adjust claims more quickly and accurately
But why has the growth and impact of insuring connected homes been . . . gradual?
From a homeowner’s point of view, there are a lot of things that could be connected (entertainment systems, heating/plumbing/electrical systems, appliances, lighting, windows and exterior doors, outdoor areas, and last but certainly not least virtual assistants, i.e., Alexa and friends). Many homeowners find that getting all of this installed and usable is a daunting proposition.
That challenge is compounded by the fact that many devices currently do not work and play well together – in tech-speak they lack inter-operability. In other words, some connected items talk to one hub and can be controlled out of the box with one app; but other connected items may talk to another hub and require a second app. (Ok, a person who has the skill set and inclination can usually overcome this, but this is a subset of a subset of the homeowner population.)
For years, many insurers have been encouraging the installation of connected home devices by offering discounts on purchase prices, or sending devices directly to homeowners, or offering a reduced premium – for example, here, and here.
From the insurers’ perspective there is an important distinction between connectivity within a home and connectivity from a home.
- If the devices are installed properly, and are connected within the home, insurers will capture some of the benefits of the first two value propositions (improved image, and reduced losses).
- But to realize the third value proposition (having data, analyzing it, and using the findings to improve products, pricing, etc.); data must flow from the connected devices to the insurer (or to a data exchange).
In all cases, for insurers to realize the benefits of the value propositions, it has to become easier for more homeowners to make their home a connected home.
Matter is coming and should help
Matter is a communication protocol designed to enable out-of-the-box communication among smart home devices, mobile apps, and cloud services.
Matter is being developed by the Connectivity Standards Alliance (CSA). CSA brings together a very impressive rosterof over 200 tech, manufacturing, and retail firms, led by Amazon, Google, Apple, Comcast, Samsung SmartThings, Resideo, IKEA, and others. CSA develops standards, certifies that devices meet those standards, and promotes those standards.
Matter is designed to provide simple, anyone-can-do-it connectivity (just by scanning a QR code) among devices, hubs, and ecosystems that have been certified by Matter.
Matter is close to, but not quite, ready for general availability. The final “development gate” should be this summer. Even pre-launch, Matter is getting a lot of media coverage – e.g. here, and here, and here.
What homeowners insurers should do:
- Understand what Matter will do, and how rapidly it will change the connected home segment.
- Plan for homes connected by Matter.
- Enhance or create new connected homeowners products
- The most challenging, but most rewarding step: develop ways to leverage Matter to realize the third value proposition – capturing, analyzing, and utilizing data to enhance the entire value chain: product development, pricing, underwriting, and claims.
About The Author
Donald Light is a Director in Celent’s North America Property/Casualty Insurance Practice. His coverage areas include: technology and business strategy; connected car and connected home, autonomous motor vehicles, insurance platforms, InsurTech, voice strategy, digital, the Internet of Things, the new architecture for insurance solutions, and due diligence for insurance technology M&A transactions.
His recent consulting work includes a due diligence assignment for a Private Equity investor considering the acquisition of an insurance technology firm, a build-or-buy analysis for core system modernization, and integration of an acquisition of an insurance technology firm.
Donald is widely quoted in the press and media, including The Wall Street Journal, The Economist, NBC and CBS Evening News, CNBC, and National Public Radio. He is a frequent presenter at industry conferences including those sponsored by IASA, ACORD, and PCI.
Prior to joining Celent, Donald was an insurance subject matter expert with Sapient and for his own firm, where he advised senior managers at major insurers and other financial institutions. He has also held a senior research position in Allstate’s Research and Planning Center.
Donald has a B.A. in economics from Princeton University, and an M.B.A. from the University of California, Berkeley.
You can reach Donald at [email protected].
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies (NYSE: MMC). For more information, visit celent.com.