How Smart Home Devices Will Impact Residential Property Claims

Insurers and consumers can benefit in multiple ways as more smart appliances and devices move into homes, according to Joe Wodark, director of product development for Verisk Insurance Solutions. First notice of loss, settlement and subrogation are all claims processes that are expected to improve as a result of the data derived from smart devices.

The data will be useful in several stages of the insurance process, he said.

“As you look at each stage of the insurance value chain, beginning with customer engagement all the way through pricing and underwriting, and ultimately, claim settlement, the data from connected home devices has the potential to improve each stage,” said Wodark.

In addition, he said insurers will benefit from being able to provide tailored coverages.

Claims will benefit from receiving improved data at first notice of loss. At some point, the industry will see the data transferred to the insurer in real time, he said.

“Knowing that a water heater malfunctioned, as an example, and that was the cause of a water event in a basement, may open up the opportunity for subrogation for that claim,” said Wodark. “So, you can see that at each stage of the insurance value chain, connected home data could be useful.”

Insurers are adapting to the growing usage of smart devices via an affinity model, Wodark said. This occurs when insurers partner with smart home device companies. There are some insurers that are acting as angel investors to small, connected home startup companies in order to gain access to the data collected, he said.

Insurers are also buying and deploying connected home technology directly to their policyholders, he added.

Despite the convenience connected home technology brings to consumers, data security remains a continued concern for both insurers and insureds.

“The concern is real – it’s shared by both insurers and consumers – is the risk of cyber breach and cyber threats associated with these connected devices. There was a recent breach where a specific connected home product was accessed by a hacker and that gained the hacker the ability to control and manipulate some other connected devices within the home,” Wodark said.

Both want to be reassured that data is protected from cyber hackers, he said.

“I think insurers are aware that while connected home devices present a great opportunity for a new innovative data source, they also pose some threats given their infancy in their product life cycle at this stage,” said Wodark.