Kevin Gaut, CTO of SSP for Insurers talks about the connected home and how it’s quickly developing. More and more households are filling with systems, devices and physical objects all talking to one another and the wider world. With upwards of a trillion connected things, such as cars, appliances and cameras, the “internet” of things is fast becoming a reality. In a world where connection is ubiquitous, what does this mean for an insurer?
Traditional question and answer based-ratings are being replaced by usage-based models. Rather than asking a question such as “Is my house occupied during the day?” which potentially promotes indirect fraud, wouldn’t it be better if my house, and therefore my insurer, knew when the property was occupied and when it wasn’t?
Currently we all live in houses with a mixture of brick, stone and so on. I currently have three Wi-Fi spots in my house just to get enough coverage and my mobile phone coverage is also poor – but I’m not going to redesign my house to facilitate connectivity. I am, however, going to bring technology into the house to improve my connectivity. This is the way the connected home could work, with consumer products like televisions, PlayStations and Xboxes bringing the connected capability into the house.
Years ago, my brother-in-law installed this device under his kitchen unit that set off an alarm if it got wet. He completely forgot about it until he moved years later, then he got a phone call from the new owners saying there was an alarm going off that they couldn’t find. They had installed their new washing machine and it hadn’t been done properly, so there was a leak setting off the alarm. This is an example of how something very simple could help, but wouldn’t this be better if we could connect the water detection to another device which could potentially turn the water off? Or even better, if the washing machine knew it had a leak and sent me an SMS or email to say as much.
The connected home driver for me is safety. It’s about your home being self-protecting – after all, it is my castle and I want to protect that from harm. Clearly fire, floods and burglary are all risks from which no one person is completely safe. Most residences have alarm systems, but these are not yet connected in the mainstream.
For me, the knock-on effect of a flood or an intruder entering my house is more catastrophic than the cost of my insurance premium or the cost of a claim to my insurer. I think most people would rather pay extra on their insurance to not have these things happen than to save £20 on their premium.
Research from Aviva in 2012 showed us that leaking water from pipes is the number one cause of house insurance claims. Storms come close in second place and accidental damage is third, with theft in fourth and fire in fifth place. Reducing claims for insurers and the cost of claims would save insurers significant revenues and, if they can identify a potential flood hazard or a potential burglary and offer improved safety, security and peace of mind, then it is definitely something worth investing in.
But what is the average house insurance policy for the average house? So the connected home would reduce claims for insurers, but household insurance isn’t like motor insurance – there just isn’t the same cost saving motivation as for say a younger driver. House insurance is about feeling secure in the knowledge that if something happened then it would all be OK. Anything that an insurer could do through technology to help me feel more secure would be a welcome addition and attraction to my policy.
Fundamentally, how houses are maintained isn’t monitored and doesn’t impact on the insurance. So the more insurers know about their customers and their behaviours, the more they can tailor premiums, enabling them to profile risk more efficiently and deliver a better customer journey.
Today people are using their phones as keys, ordering food shopping via their fridge and playing games with others all over the world via their game station. So is having a device that detects water leaks, burglary and power outages and notifies us of the risk before it happens feasible? When renewing your house insurance premium and you are asked “Is your house occupied during the day?” you think, what a ridiculous question, most houses aren’t occupied during the day. But can you track whether a house is occupied or not without motion sensors? Could your alarm system tell your insurance company that your house isn’t occupied during the day? With all of the smart technology already available today, why can’t we capture this information and then have it reflected in our premiums?
Collaboration could result in reduced risk, cost savings and more energy efficiencies for other industries, insurers and customers. If your house knows that you are there, how much more efficiently could we use energy resources?
An example to look at is Bill Gates House. When he had his house built years ago, everyone in the house had to wear electronic passes so the house knew who was allowed into which room. He had so many visitors he had to be able to control where they were. The house controlled who was where inside it.
Then there is the new Kinect and Microsoft connect technology that can recognise your voice and facial expressions, how long will it be before this technology is applied to other things like televisions? This isn’t rocket science technology, this is available now.
The sole fact that, if someone leaves their house, either with something left on, a pipe leaking or with a window or door unlocked, that the house could then notify them that they need to return immediately is, in itself, priceless. But from an insurance perspective, that’s the key to it. It’s about reducing claims, reducing the cost of claims, improving the customer journey through added value and giving customers piece of mind – encouraging them to remain a low-risk customer for the long term.
The connected home is a positive step in the right direction for the industry and the population as a whole, but this connected aspect does involve risk. The current connected world can be dangerous place to live – tagging yourself on holiday or out of the house at a fancy restaurant on Facebook or Twitter, lets people know you are not at home. Putting all this information out is dangerous and controlling who has access to this information and what they will do with it is another factor that needs consideration. Everything comes with a responsibility and there is a responsibility on you to consider what information you give out about you and your life.
We all use the term Big Brother, but how far away is that from actually materialising? The Big Brother house, now there is a connected house for you.
If you remove the television element of Big Brother, it is a connected house. They don’t have to go outside for anything or shop for food, while the house watches their every move, opens and closes doors, turns things on and off, and knows exactly who is at all times and where they are. It’s a world where the television knows who is watching it and, based on that, delivers home screens with favourite channels or apps that suit, like parental control.
We all watch Big Brother – well a few of us anyway – as we’ve managed to keep it going for over 10 years, but would we really want to live in that house? Is that the end game and where we are headed? Is that the new connected world?
In my opinion, people are funny about their houses. For example, you go on holiday for two weeks and then come back to your house. If you’re like me, the first thing
you notice is that the place needs redecorating –it’s because you’ve been away that you notice it. But within a week, you’re living in it again and you stop seeing it. Everyone loves their own space; it’s where they feel at home, secure and safe.
With each and every person, it will be a different aspect of their life that drives their need or want for their ideal connected home. It will be their television, game stations, phones, children or pets.
As an example, I did an activity a couple of years ago with my friend to raise money for charity. We all went round the local area knocking on doors with a token Father Christmas. We were playing Christmas music, gathering the community together and collecting money. If I’m honest, I was dreading it.
But it was brilliant! Everyone loved it, people were opening their doors, families were coming out and enjoying themselves with their children. The experience showed me that, in this particular area, by the time 7pm arrived on a Thursday night, everyone was in their pyjamas, watching Emmerdale and eating a takeaway curry in their own safe haven.
From a behavioural perspective, I remember thinking, everyone is so different. You had people whose houses were absolutely spotless and looked unlived in, as well as those who had everything everywhere. But for all of those people, it was their home. It was amazing how many people were willing to open the door at that time of night. But they did so because they felt safe, secure and comfortable.
This proves that people are genuinely driven by different aspects of their life and what interests them. People are funny about their houses and love their pets, but want to feel secure. They opened their doors to me that night because they felt secure, and anything that can help people feel more secure in their house is a good thing. Anything that provides that safe feeling and protects people from risk will drive interest.
Currently, with telematics, the more we learn about more people and the way they behave, then the easier it is to protect them, reduce their premiums and cut their claims and costs. The cost of a claim for an insurer is an expense, but the cost of a claim for someone on their own house can be catastrophic.
It is about the things that people value immensely. It’s the photographs, the jewellery and the things that mean something to the individual and represent a memory, a feeling or someone special. Anything that can prevent treasured possessions from being harmed and gives peace of mind will help in many ways.
We will learn more about these things with the technology and devices that we bring into our house, rather than the enablement of our actual houses. The technology to enable the concept already exists; it’s just a case of how we choose to use it and how we connect it. We will start to see smart houses with regards to the environment, the introduction of 4G, the cloud and telematics. The connected world is here to stay, but the main driver for insurers is reducing claims and preventative actions, as well as providing customised services and an effective customer journey.
So the connected home could easily be a reality. It’s about making people feel comfortable and safe and secure, and anything that can make life that little bit easier.