The majority of US insurance companies see a bright future ahead for themselves as homes increasingly become more ‘smart’.
According to new research findings released by IT services company NTT Data, almost nine out of ten (87 percent) expect the IoT to improve their relationships with customers, while 83 percent believe it will help them attract new ones. The study polled 1,000 US homeowners and over 100 US insurance companies in October 2016.
That’s not to say, however, that insurance companies don’t forsee hurdles ahead. According to the NTT Data report, IoT Disruption and Opportunity in the US Insurance Market, more than two-thirds (68 percent) believe that the inability to gain access to data from smart home devices will be a major challenge to finalizing nationwide programs. On top of that, 62 percent anticipate hurdles in building analytics into their underwriting processes and more than half (55 percent) are concerned about the expense required to purchase and install devices in customers’ homes.
“While enthusiasm for and investment in the smart home ecosystem is high among [insurance] carriers, major challenges still exist in its evolution,” said Normand Lepine, senior practice lead for insurance data and analytics at NTT Data.
“If carriers are to realize the anticipated benefits of smart home technology, they must first lock down the necessary business capabilities for adoption, including data analytics and data security, and find partners with proven IoT capabilities to help them prepare to deliver innovative services and products to their homeowner policy holders.”
Read more: The mainstream connected home remains distant dream, says Gartner
Customers lack conviction
Those policy holders may take some convincing, however. The research reveals a glaring perception gap between insurance companies and their customers when it comes to policy protection, security, price and IoT.
While 55 percent of insurance companies say, ‘It sounds great – sign me up!’ when it comes to smart home programs and policies, only 16 percent of customers feel the same way.
Likewise, almost three-quarters (72 percent) of insurance companies believe that customers feel protected by their homeowner policies, but only 37 percent of customers themselves agree.
And while 77 percent of insurance carriers say they really care about improving customers’ safety and security, less than one-third of customers (31 percent) believe that to be the case.
Read more: Flexibility will be key to dominating the smart home market
Keepers versus seekers
The research divides insurance customers into two categories. The first is the ‘keepers’, older customers who are less technologically savvy but more loyal to their insurance providers. The second is the ‘seekers’, those who are younger, early adopters of technology, less loyal to their provider and more likely to demand more personalized policies.
Seekers, unsurprisingly, are more willing to share data from smart home devices with insurance providers – perhaps in pursuit of a better deal based on their personal circumstances. Forty-seven percent, for example, would be happy to share data from a smart thermostat with their insurance company, compared to just 28 percent of keepers, and 59 percent would share smoke and carbon dioxide detector data, compared to 39 percent of keepers.
Neither group, however, was keen to share data from in-home security cameras: just 24% of seekers and 18% of keepers were prepared to go that far.
Seekers, then, perhaps present the most interesting opportunity for insurance companies, as well as the most risk. They’re more likely to install smart home devices, more likely to share the data, but also far more likely to defect to another provider, even those from outside the traditional insurance sector such as banks or retailers, according to the research.