The financial services industry, particularly the insurance sector, is proving to be a valuable partner in the IoT ecosystem. Affinity relationships between the connected home and insurance industries to offer nominal homeowner’s insurance discounts if consumers place specific connected devices in their home. While this affinity-style relationship benefits insurers by providing them access to a new source of data, and similarly, connected home providers by boosting hardware & system sales, the full potential of a marriage between these two industries has yet to be reached.
Insurance discounts for connected home technology are nominal (~5%). Yet, insurers are eager to provide a competitive price to lower-risk customers. Therefore, if insurers could obtain historical connected home data for research purposes, findings may suggest that discounts should be increased based on the presence /usage of such technology within the home. Therefore, the total cost of ownership for both the technology itself and the related insurance product could be reduced. The combination of these factors could boost consumer adoption of connected home technology tremendously. By working together in a joint research capacity, both industries could lower the total cost of ownership of their respective products, leading to profitable growth. However, how much data is enough to generate actionable and conclusive insights and is the one-off affinity relationship model going to be able to fulfill this need?
Partnering doesn’t stop with joint research. Once demand for connected home data is established through the new insurance rating plans created by this research, a tangible value can be placed on the data. This creates an entirely new business model for the connected home industry within insurance. The opportunity to monetize data. Insurers are thirsty for new ways to segment risk. Connected home data fed into new pricing models could allow insurers to offer the best price to the best risk. Insurers benefit by way of attracting more profitable business and home automators create new revenue leveraging existing assets. For this model to work, insurers need data from a variety of connected home providers, in a consumable format, and in close to real time
A marriage between the insurance and connected home industry is imminent. However, how this marriage takes form could ultimately determine the longevity of its success. If these two industries can find a way to share information seamlessly and at scale, the upside is tremendous.
Head of connected home research, Verisk Insurance Solutions
Joe Wodark, head of connected home research for Verisk Insurance Solutions, is responsible for product development and management strategies. He is currently leading Verisk’s Home Telematics program. Before joining Verisk, he worked with a global management consulting firm and collaborated with client leadership of top ten insurance carriers to craft company-specific underwriting and product solutions. He also held various product management positions with Allstate Insurance Company. Joe earned a bachelor’s degree from Purdue University and an MBA from Lake Forest.
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