Smart home insurance ?

Smart home devices are more and more popular in the UK, from Amazon’s Alexa voice service, to remotely activated thermostats, to motion sensors – according to a study by Deloitte UK, 3% of households have a smart security system, smart thermostat or smart lighting, and 5% of households are considering buying a smart home device. Some of these increasingly sophisticated devices are designed to protect our homes from damage or crime – but do they help when buying home insurance?

Home insurers usually give discounts to customers for having good offline security precautions and smoke alarms, so you would think that customers with smart home devices designed to prevent damage or crime would see a difference to their premiums, with smart home insurance. But so far, this hasn’t been the case; insurers have been slow to recognise the benefits and to reduce premiums. PolicyCastle is working with its insurance partners to develop truly smart home insurance that does take into account smart home devices when setting premiums, and we expect to launch this early in 2018.

In the meantime, this blog covers what smart home insurance means:

Potential benefits from smart home devices

What are the issues for insurers with smart home insurance?

Could smart home insurance become too intrusive?

Who will particularly benefit from smart home insurance?

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Potential benefits from smart home devices

One of the most obvious potential areas to benefit from smart home devices is home security. Smart locks can tell users if a door has been opened when the user is out, or if a door has been left open when it should have been shut, and send a message to the user’s smartphone immediately. Smart cameras can tell the user if someone is in their house, and many allow the user to then speak to the person to tell them they are being monitored and if necessary tell them to leave. Manufacturer Cocoon’s device senses whether the movement in a room is from a pet or a family member, based on their movement patterns, and knows whether to alert the user or not.  (If you are unlucky and are burgled, see PolicyCastle’s blog on what to do.)

Many home insurance customers are not aware that the biggest source of claims is escape of water from boilers, pipes or water tanks. See PolicyCastle’s blog on escape of water. So devices that can prevent leaks, or detect leaks before they develop into a problem, could be very beneficial for home owners and insurers. Leakbot from Homeserve is a device that is clipped to a water pipe inside the house and senses changes in humidity to detect leaks when they are still small. Smart thermostats can help maintain an appropriate temperature in your property to prevent damp (see PolicyCastle’s blog on how to spot signs of damage from damp) and also to reduce the risk of pipe bursting during cold snaps.

Another area in the home the where smart devices could make a difference to insurance is smart lighting, or smart lightbulbs. Devices that give the ability to turn lights on and off remotely when the inhabitants are out, to make it look from the outside like there is someone in the home, is likely to deter intruders from trying to break in.

And one of the key benefits of smart home devices is that they can be switched on remotely, or set to turn on automatically – no more forgetting to switch an appliance off, or on, when you go out.

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What are the issues for insurers with smart home insurance?

Insurers have been slow to recognise smart home technology when setting premiums for 3 main reasons:

  1. Standard minimum security requirements. The insurance industry has developed a fairly standard view on what is, and isn’t, acceptable security for a home, and what is enhanced security. So far this view hasn’t caught up with the smart home security devices available, so in some cases having a smart home device, in particular a smart home lock, might see customers penalised because they don’t meet recognised minimum security requirements. See PolicyCastle’s blog on standard minimum security requirements.

Over time insurers will catch up, which links to

  1. There isn’t a lot of data about how effective the smart home devices are. Insurers like to base their pricing decisions on a very large amount of data, and so far the amount of data available on how the devices work, and reduce overall claims or the size of individual claims, is fairly small.
  1. Concerns about cyber risk and liability if devices fail. As smart home devices have become more popular, so have concerns have risen about the ability of hackers to access them. And if there was a widespread failure of a device that the insurer was relying upon to enhance security, or monitor leaks, would the insurer be able to pursue a claim on the manufacturer? These concerns only increase when news comes out of any smart device having problems, as Lockstate did recently

Having said that, there has been some progress – Leakbot has announced deals with three insurers: Aviva, Legal & General, and RSA. These deals are for customers of the insurers to get discounts on the Leakbot device, though there doesn’t appear to be any reduction in premiums for customers to buy them. And Neos, a new insurance business, has partnered with Hiscox and Munich Re to provide an integrated package of their own monitored smart home technology and a home insurance policy.

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Could smart home insurance become too intrusive?

When insurers do give discounts to users of smart home devices, it will start on the basis that the devices are better than the locks, or thermostats, or human checking, that they replace. But smart home devices also capture a lot of data about the user. Over time, insurers would like to be able to access this data to see how risky the user is when setting their home insurance premium – potentially insurers will learn more and more about what customers are doing in their homes. Smart home insurance will become smarter and smarter.

But will we be comfortable with data about when we leave the house, when we turn off the lights, and how much we heat our homes, being known by insurers? PolicyCastle’s view is that just as we are comfortable with Amazon having a detailed profile on us, over time we will become comfortable with our smart home data being shared with the insurance industry, if there is a benefit to the customer. So the customer getting a quick insurance quote, or knowing that they will get a quote below the average cost of home insurance, will be enough for most customers to be willing to share data.

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Who will particularly benefit from smart home insurance?

It looks like all customers of home insurance could benefit from smart home insurance, but customers with different risks from normal are likely to benefit the most. Owners of second homes or holiday homes, which may be left unoccupied or let out to short term tenants, are likely to benefit from being able to monitor their properties and see problems before they happen. So customers for holiday home insurance in Devon or holiday home insurance in Cornwall, or second home insurance in Manchester or Liverpool, may be the next groups of people to adopt smart home devices.

Similarly customers for larger home insurance or listed property insurance, types of properties which may have specific maintenance needs, are likely to benefit from increased awareness of problems provided by smart home devices. Not only will they be more aware, but they will be able to demonstrate to their insurers that they are monitoring for problems. There is likely to be a similar benefit for customers for non standard construction home insurance, another property type that requires higher levels of maintenance then standard properties.

Unsure if you should describe your property as a second home or a holiday home for insurance purposes? See PolicyCastle’s blog.

Until PolicyCastle’s smart home insurance is ready, you can look for home insurance on our site – here is our article on how to choose best value home insurance.

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Get your quick home insurance quote from PolicyCastle

 

 

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