SMART HOMES: POWERING NEW P&C INSURANCE September 2018 1
SMART HOMES: POWERING THE NEW P&C INSURANCE Smart home technology is not only revolutionizing Property and Casualty policy writing - it s revolutionizing the entire P&C sector. and risk offer exciting new product flexibility and accountability for insurer and insured. This new connection between the two is ongoing, rather than reactive and event-based. As a result, rich new customer relationships are now emerging, powered by personalization and immediacy. These clever, accessible technologies are driving new services, partnerships and opportunities, along with explosive industry growth throughout the insurance landscape. And thanks to smart home, not only is the industry getting bigger, it s getting better. Risks are being reduced, often with the customer s active engagement. Claims are being reduced, both in number and size. Consumers now expect broader options and they re getting them. All this is being driven by smart home technologies. Source: InsuranceNexus Connected Claims USA Summit Consumerization is a primary goal for the new insurance paradigms. Note that communication is the key driver for these personalized services and service alerts. P&C insurers are perfectly positioned to capitalize on the opportunities made possible by smart home products and services. These technologies not only serve today s customers better, but open new inroads to tomorrow s, including large addressable markets among millennials, seniors and small businesses. Source: CB Insights Insurtech, particularly in P&C, has been one of the hottest investment sectors in the US over the past four years, and activity continues to rise. Simple and affordable smart home products bring insurers in line with the usage-based payment models today s customers demand. Personalized policies, based on customer-specific usage Smart home products and services are easily added to any insurer s offerings, with products in every protective category. But only one technology lets them all work together -- Z-Wave, the market leader in smart home. Z-Wave products provide the compatibility, security, flexibility, ease and the right economics to make your company successful -- quickly -- in the new insurance paradigms. 2
SMART HOME TAILORS THE POLICY Technologies that monitor and control the home have brought consumers unprecedented options and expectations. The disruption has been felt across many business verticals. For example, consumers now monitor and modify their home energy, and expect utility bills that fully reflect their economizing. They can choose between a professionally monitored security system for a monthly charge, or a self-installable, personal-alert system with no fees attached. Consumers now expect this same flexibility from their insurance providers. They want to pay for only their own usage and needs, rather than that of a risk pool. They want to be rewarded for keeping safe habits and taking preventive actions. Traditionally, insurance products have been priced according to the level of risk against loss that they represent. Thanks to smart home technologies such as sensors, wireless cameras and smart locks, the trend has now shifted toward pre-emptive loss prevention. This shift in the market is allowing insurers to offer exciting new products to their customers, while making their own underwriting more efficient. The insurance paradigm is moving from risk assessment to personalized loss prevention. While it is a justifiably popular smart home product, a video camera is by no means a sole security provider. Sensors and other smart products are even more productive to the insurer. An inexpensive moisture sensor alerts potential flooding, which is the #1 claim in the field. In the event of an unexpected pipe burst, a smart water valve can staunch the damage in seconds. A smart smoke detector lets an empty house know there s fire and call for help. Sensors let everyone know that all systems are safe and normal at home. Customers want to be rewarded for pitching in to reduce risk. It s easy to do with smart home, and there are multiple business models. Whether your company wants to offer a discount for smart home products, or subsidize their purchase, or even wants to offer its own branded system -- smart home technologies are secure, accessible, easy to use and install, and immediately available. 3
CONSUMERS ARE WILLING TO PAY According to a recent Accenture study, 80% of consumers would switch insurers for more personalized services, and 41% would be willing to pay more for those services. The swing is being driven in particular by the younger Millennial generation, which is fluent with technology and happy to share quantified data -- if there s a reward for doing so. According to a recent Willis Towers Watson report, Nearly 90% of Millennials said they were open to signing up for a usage-based insurance policy in exchange for discounts, compared with 74% for other age groups. How much more would they be willing to pay? According to Ovum, half of surveyed respondents would pay 5% more, 15-19% said they would be willing to pay 10% more, and a not insignificant customer base (3%) reported they would pay 20% more to get the services and tailoring that was most important to them. Nearly 90% of millennials said they were open to signing up for a usage-based insurance policy in exchange for discounts, compared with 74% for other age groups. Willis Towers Watson Source: Ovum Millennials are more tech-forward in comparison to other age groups, and also more willing to adapt their budget to fit personalized services from their insurer. In the new insurance landscape, it s important to appreciate that ease has value to the customer. Convenience is a product -- one that s easily provided by insurers in the right place at the right time with the right offering. E-commerce is a natural vehicle for insurance as an attachment sale. When consumers go online to buy smart products, they re doing so to make their lives safer and easier. What could be a more natural attachment than insurance? Imagine being able to add property insurance to that valuable new online purchase, just as easily as we can now add trip insurance at a travel site? 4
IT TAKES AN ECOSYSTEM Smart home isn t a product, it s a strategic grouping of products, connected to the outside world via a hub to the Internet. While many standalone devices are capable of multiple smart operations, no one product fully monitors and protects an entire home and its inhabitants. Smart locks, lights, outlets, thermostats, access sensors and valves are just a few of product types that are significant to the smart insurance picture. These disparate devices must work interoperably. Just as no one product makes up a thorough smart home, no one brand or maker can deliver all the different products that are applicable to a smart home solution. Products of different types need to speak the same language and dialect. They need to do so regardless of brand or seller. According to research by Parks Associates, platform interoperability is an important consideration for 75% of U.S. broadband households that are planning to purchase a smart-home product. On top of this compatibility, newer smart products have to work reliably with legacy smart products that have already been installed in the home. Only one smart home technology can boast such an ecosystem -- Z-Wave. Designed specifically for smart home applications, Z-Wave technology has been adopted by more than 700 manufacturers and service providers worldwide, including market leaders in virtually every relevant vertical. More than 90% of the smart security panels installed in the U.S. are powered by Z-Wave. Z-Wave offers an unmatched ecosystem of more than 2400 products that are certified interoperable and backward compatible. No other technology can match the breadth of this ecosystem, which includes dozens of device types that insurance companies can mix or match for compelling PC insurance possibilities. 5
MULTIPLE, FLEXIBLE BUSINESS MODELS Good Better Best Discounts: Insurers can offer cost incentives for customers that install preventive smart products in their home. The discounts can be applied toward the purchase of the devices or as a discount on monthly premiums. This easy method lets insurers extend the customer relationship with low risk. 1 2 3 Discounts Partnerships Branded Product Survey after survey shows that consumers are interested in technologies that can play a role with their insurance coverage and costs. How can insurers capitalize on this opportunity? How do they get in the game? There are three different business models to choose from. Each increasingly extends the insurer s reach and deepens the customer relationship. Source: Parks Associates Consumers are open to variety of incentives that would spur them to buy smart home benefits from their insurer. While most prefer direct financial rewards, others would pay for new services from their insurer, so long as a discount is involved. 6
Partnerships: Insurers are increasingly turning to partnerships with service companies that already have a footprint into the consumer s home. These include security companies, triple-play providers and home improvement retailers. This model lets the insurer attach its services to a broad, established customer pool. Utilities Retail THE TIME IS NOW! Consumers naturally look to insurers as their first source of protection for their home and property. Z-Wave s unparalleled selection of proven, market-leading devices, along with easy-todeploy cloud services and easy-to-use software applications that run the entire home from one smartphone app, lets carriers take complete control of their customer experience. Telcos Builders According to Parks Associates, consumers have varying preferences on how they d like to work with their insurers on smart products. Some prefer a discount on products that they d buy. Others would like to buy the products from the insurers themselves and receive a discount. Some would be happy with product financing, while others would switch for a discount on premiums. Security Providers Branded Products: This is the gold standard -- your company s own branded smart home services. Consumers already look to their insurers for protection, and now your brand can literally be in the home 24/7. In addition to controlling the customer experience, this model lets the insurer own the data, which leads to new and better products and services over time. With Z-Wave technology, the choice is up to the insurer. Prefer easy discounting? Z-Wave is available at technology retailers everywhere. Prefer partnerships? Z-Wave is the enabling technology of choice for the market leaders in security and telecom. Would like to see your own brand on systems, engage with your customers directly, and keep control of the precious consumer data? OEMs are ready to produce the products you -- and your customers -- want. Find out more. Visit www.z-wave.com/insurance Whichever model is best for your company, Z-Wave products are the solution. They are widely available at retail for DIY installation and discounts. They re the protocol of choice for service providers in security and telcos, so partnership opportunities are plentiful. And through the broadest range of compatible, interoperable products, your company can quickly and easily bring its own branded solution to market. 7
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