Buying a home is one of the largest financial investments that people make throughout their lives and it is no surprise that consumers want to feel that their home, as well as the contents inside that holds both financial and sentimental value, is protected at all times.
According to the Association of British Insurers, the average home now holds contents worth £35,000. That is nearly £1 trillion in total. Insurance is a booming business as people seek to protect their cherished items, especially as the cost of individual incidents of theft, water damage and fire can quickly amount to thousands of pounds.
Insurance provides policy holders with the peace of mind that, should something go wrong, the things they hold most dear are protected - or at least it should. In the world of the mass market businesses, the traditional process of insurance has become increasingly impersonal. This is due to a variety of reasons including the large amount of data that the supplier holds on each customer, which ultimately means that the company treats each customer simply like a set of data and uses numbers on a page to assess their risk, rather than engaging with them on a personal level. It could also be due to the imposed excess premiums due to the actions of other risky neighbours, or simply the complexity of making a claim. Overall, many consumers feel as if they are simply dancing to the tune of the large corporate insurers, and feel discontented with the dynamic of the relationship.
However, the industry is changing at a fast pace. This is fuelled by innovative connected technologies that are revolutionising the way people can interact with their homes, even when they are miles away. This technology has the potential to place the policy holder back into the driving seat.
The necessity of price redistribution
One of the major issues in the market is the pricing model. Steps forward have already been taken to address the imbalance of power in the relationship between insurer and consumer regarding this subject. Last year, Citizens Advice issued a “super-complaint”, calling on the Competition & Markets Authority (CMA) to bar companies from unfairly ratcheting up premiums charged to loyal, recurring customers whilst offering attractive incentive rates to new customers.
Whether or not the CMA takes action, this initiative successfully highlighted consumer discontent and alternate ways of establishing insurance policies are becoming increasingly prominent. These are intrinsically linked to the integration of connected technologies into the insurance market. By collecting individualised data about a home’s day to day activities, its actual security capabilities and its owners’ lifestyles, insurers will be able to price policies for genuine, personal risk profiles for the way householders really live their lives.
Technology such as cameras, sensors and monitors installed in the home can benefit both the policyholder and the supplier. These devices can actively monitor the household throughout the day and night as well as send notifications of unusual or negative activity directly to a mobile device such as a smartphone or tablet. Thus, enabling homeowners to remain connected to their property 24/7.
Empowering a proactive customer
This technology instils a tremendous psychological shift in householders and enables them to take a preventative rather than a reactive approach to incidents. If the homeowner is immediately alerted to an incident, they are able to take swift steps to reduce its impact or even eliminate it altogether. For example, in the case of a fire, the fire services can be called and family can be warned not to enter the property.
In turn, these are the kinds of customers insurers want to work with. Responsible and safe homeowners pose less of a risk, resulting in lower premiums. It’s a win win all round.
Benefits for all
A symbiotic relationship between policy holder and supplier can also be more easily achieved. Establishing a close relationship with an insurer may not be top of mind for consumers, however, an insurer is closely involved in the resolution of some of the most distressing and emotionally fraught events during a customer's life. The aftermath of a fire, leak or burglary, is emotional and distressing for anyone - the last thing consumers want is to face the complexity of further official data collection.
The additional information gained from the steady stream of signals sent to the insurer from in-home sensors and monitors would allow the claim handler to better understand the incident and empathise with the policyholder, simplifying and speeding up the process. This is a sure way to stand out from competitors as well as garner loyal and lasting customer relationships.
Smart technology also has added benefits for the householder. In the event of an incident, such as theft, victims can find themselves feeling vulnerable to repeat attacks as well as upset and frustrated by the obscurity surrounding the event.
But smart monitoring technology could provide an answer.
Live streams and the ability to record activity during the time of an incident can not only help lessen the concerns of the homeowners by providing answers, but also aid the official investigation. A video can provide police with vital evidence and clues that they can use to aid their inquiry. Overall, this information can provide victims with a greater sense of connection and control over their home, reassuring them that the best option is already in place, or offer them insight on what else can be done to make their home safer.
A look as what the future holds…
Over the next five years, the insurance industry is going to see continued disruption through the continued introduction of innovative technology. This will lead to a greater acceptance and integration of these smart devices into people's homes and everyday lives.
However, while it is easy to get caught up in the dazzling industry hype surrounding AI and IoT, we shouldn’t get ahead of ourselves. It will not be AI specifically that puts tech at the heart of insurance. Rather, it will be integration. Integrating insurers' services with connected smart assistance, such as Amazon’s Alexa, Microsoft’s Cortana or Google-Home, will enable customers to easily access information about their policy through their smart-home ecosystem. This will ensure that consumers have a seamless experience of their insurance policy without being held back and frustrated by system bottlenecks. Consumers will be able to ask: “Google, when does my policy expire?”, “Alexa, who should I contact to make a claim?” or “Cortana, can you please run a price comparison when my policy is up for renewal?”.
This will reduce customer frustration by instantly transferring data into new systems, such as auto-filling data fields in related apps, such as price comparison sites. Ultimately, in the very near future, insure-tech will no longer be a novelty experience. The relationship between the householder and connected technology will soon be the norm and will help to empower the consumer to regain a seat at the insurance table.
Matt Poll, CEO and Founder, Neos