How Insurance Carriers Are Using Smart Home Devices as Inspection Technology

How Insurance Carriers Are Using Smart Home Devices as Inspection Technology
We’ve heard a lot of buzz about how smart home technology can enhance the property owner’s lifestyle. From smart thermostats that “learn” the homeowner’s schedule and temperature preferences to the ability to smart lock systems controlled by a smartphone, there isn’t much that a smart home can’t handle.
Inspection Technology Now Includes Smart Home Devices
What if we told you that smart home devices are now being used by insurance carriers as inspection technology to mitigate risk? That’s right. According to research in 2015, 22 percent of insurance carriers in the property and casualty industry ran pilot programs to test the impact of connected smart home devices on homeowner’s insurance policies.

For example, one of these pilot programs offered discounts to customers that installed Nest Protect, a smart home device for detecting smoke and carbon monoxide. In return, Nest Protect will automatically report monthly to the insurer if batteries are charged, if sensors are working, and if the Wi-Fi connection is working well. This data provides useful information to help insurers more accurately underwrite risk.

The use of smart home devices as inspection technology will be one of the hottest trends to shape the property and casualty insurance industry in 2017. As we all know, property and casualty carriers will be facing a number of challenges in 2017, including a declining profit margin.

However, the valuable data that smart home devices offer can help insurers to mitigate losses and therefore preserve profit margins.

The Controversy of Carriers Collecting Data from Smart Home Devices
There is some controversy over the use of smart home devices in the insurance underwriting process, however. When insurers use smart home devices as inspection technology, the property owners lose some privacy. Some of the information that smart home devices reveal could cause insurance carriers to make adjustments to policies (not in the homeowner’s favor).

For example, most insurance carriers will offer a discount if an insured has a security system in place as it mitigates risk. However, if a smart home device reveals that the insured is not using the security system, the discount may not be offered.

While the use of smart home devices as inspection technology will certainly prove beneficial to property and casualty carriers in helping to underwrite risk, it will be interesting to see the number of carriers that will choose to tap into this data in 2017.

Having partnered with property and casualty insurance carriers for more than 35 years, we have seen how inspection technology has evolved over the years. We pride ourselves in using the latest technology to prepare the most accurate underwriting reports for our clients. Please contact us at Insurance Risk Services to learn more about how technology will be used in 2017 to help carriers mitigate risk.