Insuring Connected Homes: Will Matter Matter?
What’s good about insuring connected homes?
Insuring connected homes has three pretty good value propositions:
- The insurance industry can show policyholders and society as a whole, that it does more than collect premiums and pay claims
- A connected home may have fewer or less severe losses -- i.e. impacting the loss ratio via loss prevention and loss mitigation
- An insurer can use data from connected home sensors to develop better products, to price more accurately, to underwrite more effectively, and to adjust claims more quickly and accurately
But why has the growth and impact of insuring connected homes been . . . gradual?
From a homeowner’s point of view, there are a lot of things that could be connected (entertainment systems, heating/plumbing/electrical systems, appliances, lighting, windows and exterior doors, outdoor areas, and last but certainly not least virtual assistants (Alexa and friends). Many homeowners find that getting all of this installed and usable is a daunting proposition.
That challenge is compounded by the fact that many devices currently do not work and play well together – in tech-speak they lack inter-operability. In other words, some connected items talk to one hub and can be controlled out of the box with one app; but other connected items may talk to another hub and require a second app. (Ok, a person who has the skill set and inclination can usually overcome this, but this is a subset of a subset of the homeowner population.)
For years, many insurers have been encouraging the installation of connected home devices by offering discounts on purchase prices, or sending devices directly to homeowners, or offering a reduced premium – for example, here, and here.
From the insurers’ perspective there is an important distinction between connectivity within a home and connectivity from a home.
- If the devices are installed properly, and are connected within the home, insurers will capture some of the benefits of the first two value propositions (improved image, and reduced losses).
- But to realize the third value proposition (having data, analyzing it, and using the findings to improve products, pricing, etc.); data must flow from the connected devices to the insurer (or to a data exchange).
In all cases, for insurers to realize the benefits of the value propositions, it has to become easier for more homeowners to make their home a connected home.
Matter is coming and should help
Matteris a communication protocol designed to enable out of the box communication among smart home devices, mobile apps, and cloud services.
Matter is being developed by the Connectivity Standards Alliance (CSA). CSA brings together a very impressive rosterof over 200 tech, manufacturing, and retail firms, led by Amazon, Google, Apple, Comcast, Samsung SmartThings, Resideo, IKEA, and others. CSA develops standards, certifies that devices meet those standards, and promotes those standards.
Matter is designed to provide simple, anyone-can-do-it connectivity (just by scanning a QR code) among devices, hubs, and ecosystems that have been certified by Matter.
Matter is close to, but not quite, ready for general availability. The final “development gate” should be this summer. Even pre-launch, Matter is getting a lot of media coverage – e.g. here, and here, and here.
What homeowners insurers should do
- Understand what Matter will do, and how rapidly it will change the connected home segment.
- Plan for homes connected by Matter.
- Enhance or create new connected homeowners products
- The most challenging, but most rewarding step: develop ways to leverage Matter to realize the third value proposition – capturing, analyzing, and utilizing data to enhance the entire value chain: product development, pricing, underwriting, and claims.