Are insurers deploying the right smart home tech?
From water leak sensors, to shut off valves, cameras, and beyond, smart home device adoption continues to surge. Statista forecasts 478.2 million smart homes will exist by 2025, up from just over 300 million in 2022. Additionally, Parks Associates reports that 38% of U.S. households owned at least one smart home device in 2022, up 2% from the year prior. Homeowners are turning to connected devices to simplify everyday tasks and monitor their spaces. Insurance carriers have taken notice and smart home programs continue to grow in popularity among policyholders who can often receive devices for free from their insurer by enrolling in these programs.
Smart home insurance programs are aimed at helping carriers reduce claims by providing homeowners with the tech they need to better monitor their spaces and catch issues before they become costly headaches. Take water leaks for example which can result in lengthy repairs, restoration and insurance claims resulting in thousands of dollars in losses – more on that in just a bit. While it’s great progress to see insurers and homeowners embracing smart home tech more and more each year, are they turning to the right solutions that can truly make an impact and result in the greatest return on investment (ROI) possible?
Perils at the forefront
The good news is more carriers are turning to smart home tech in general which is a step in the right direction. But are they leveraging the right devices to make the greatest impact?
Initially, cameras and theft alarm systems are often the more attractive option for homeowners who have long been taught to protect their home against intruders. And while this threat is top of mind for many homeowners, they’re neglecting some of the most common and costly risks. According to the Insurance Information Institute (III), about one in 525 insured homes has a property damage claim due to theft each year, compared to one in 60 insured homes that files a property damage claim caused by water or freezing.
Making an impact
It’s clear that what homeowners want, or feel most protected by, doesn’t always match up with the events that are impacting them most. With water damage, repair costs are only the beginning. Something as simple as a leaking water line to a refrigerator could lead to weeks or months of remediation, with additional headaches along the way as homeowners vacate their home altogether until the situation is resolved. The upfront costs associated with cleanup are only the beginning. If that leaking refrigerator line goes unnoticed for months on end, the homeowner may be forced to tear out flooring, drywall, subflooring and beyond. HomeAdvisor estimates the average water damage restoration cost is $3,449 and can soar upwards of $5,702 depending on the severity of the incident.
When it comes to building smart home programs that provide value to homeowners, while also reducing risk and claims, it’s wise for carriers to look at the smart home technology that will result in the greatest ROI, while also keeping policyholders happy. Through most smart home programs, carriers offer policyholders smart home tech, often for free or heavily discounted, along with premium discounts. For carriers, the first step to smart home success is getting these devices into customer homes. But the work doesn’t end there. Simply getting these devices into homes isn’t enough because as the data above shows, homeowners aren’t focusing on the most damaging risks that could lead to costly insurance claims. It’s important that carriers develop smart home programs that educate policyholders throughout the smart home journey.
Carriers must take it upon themselves to invest in smart home tech that will monitor for and detect against the costliest perils. Often the best solution is combining several devices to create a true connected environment, monitoring for multiple risks around the clock. Not only will this result in greater ROI and claims reduction in the years ahead, but policyholders will learn what they should be watching out for, changing their behavior for the better. Together, we can leverage smart home devices to minimize damage, reduce costs and create a better homeowner and customer experience for all.
