Home Insurance: Leveraging Connected Devices and Creating New Value

The quest for new sales channels for smart home devices includes identifying unique opportunities that aren’t optimally served by existing channels. While retailers and managed service providers have provided foundational channels for smart home products, other participants in the residential ecosystem such as single- and multi-family builders and insurance companies offer additional channels with varying potential scale and momentum. In the next five years, smart home technology will become standard to half of all new single-family homes and a third of new multifamily units.

Insurance companies are waking up to the opportunities, especially as they relate to multi-family properties.

According to the Insurance Information Institute, 70 million US homeowners have home insurance (95%). Parks Associates consumer data finds 93% of homeowners have home insurance.

• 2 out of every 100 insured homes filed a water damage claim between 2013-2017. In 2017 this amounted to $13 billion in insurance payouts with an average claim cost of $10,000.
• Theft has a .31 frequency with an average claim cost of $4,300. Fire and lightening have a .28 frequency and average claim cost of $68,300.

Consumers perceive the shared interests of insurance companies in smart home products that mitigate losses. Many have familiarity with discounts for security systems that have been offered for decades. Almost half agree with benefit statements around the potential of smart home devices to reduce out-of-pocket expenses, provide peace of mind, and help avoid inconvenience from losses.

Insurers are strongly (43%), but not overwhelmingly trusted for device recommendations. Since few companies have sought to establish their credibility for device recommendations, this trust level can be increased through more intentional efforts.

Over half of consumers expect an insurance discount (58%) and product discounts (54%) in return for buying smart home products from their insurance company.

The momentum of insurance companies as a channel for the purchase or distribution of smart products is pretty slow. Few today purchase, sell, or distribute products. ?To date, insurers have focused on small incentives for smart product adoption (5% on average), which amounts to a very modest premium discount of $50 on a $1,000 policy.

Sensor-based technology can minimize damage from waters leaks and fires, an enormous cost for single family and multi-dwelling units, like apartments and senior living.

Damage from water leaks and fires in apartment buildings are far-reaching in properties. According to the National?#Fire?Data Center from US FIRE ADMINISTRATION?FEMA:

• "From 2017 to 2019, an estimated average of 106,700 multifamily residential building fires were reported to fire departments within the United States."
• "These fires caused an estimated annual average of 400 deaths, 3,875 injuries and $1.7 billion in property loss."
• "Multifamily residential building fires accounted for 29% of all residential building fires."

The effects from water damage are often long-term, costly, and wasteful; the property may reduce the future rental value from permanent damage and incur higher insurance rates stemming from a specific incident. Billions of dollars a year are lost to water leaks and damage as a result. Smart water leak detectors allow property managers to receive alerts about freeze and flood conditions detected in units and provide the ability to make the appropriate responses such as increasing room temperatures to prevent pipe damage from a freeze or entering the property to address issues with water leaks.?

Smart home tech can potentially drive billions of dollars in savings for insurers and consumers in single-family and multi-family housing. The opportunity to scale is enormous, as is the scale of investment required to bring smart solutions to market.?As insurers work to prove the impact of smart home devices, consumers continue to add devices, and apartment buildings leverage connected technologies, we expect to see more and more investments and partnerships between insurance and smart home players.

This research is an excerpt from Parks Associates research study: Opportunity Assessment: ?Builders and Insurance as Smart Home Channels.

We welcome all comments and feedback about our data and insights.