Smart Products and Insurance Use Cases: Understanding the Consumer Perspective
Consumer attitudes toward adoption of smart home devices provide critical guidance for insurers and their ecosystem partners in crafting their IoT strategies. Both consumers and insurers show growing recognition that smart home technology can help protect the home and reduce loss and associated costs. With smart home purchase intentions increasing, insurers have a significant opportunity to acquire and retain customers by offering new and innovative ways to mitigate risk and protect their homes. Adoption of at least one smart home product reached 26 percent of U.S. broadband households in 2017, up from 19 percent in 2016, according to Parks Associates research.
Recently, Parks Associates tested consumer interest in smart home devices that can detect potential damage or loss due to water, fire, and theft and then notify the homeowners and/or take automated steps to prevent the loss. Almost 60 percent of U.S. broadband households reported a likelihood to purchase one of several smart home products with these insurance-related features. While purchase intentions don’t translate to adoption, there is clearly strong interest for insurance-related devices. Interest in antitheft devices slightly edges out interest in water and fire products, but the opportunity is equally robust for all three device categories.
On average, 30-40 percent of consumers are interested in smart products that address various use cases in these categories.
When looking at the likely buyers of smart home products based on their insurance providers, GEICO has the largest percentage of customers who show interest in smart products with damage/protection features. Several factors may contribute to this:
- A younger-than-average client base is inherently more interested in technology
- Availability of technology tools, such as e-insurance and claims apps, attract a tech-enthused client base
- A consumer perception of innovation attracts more likely buyers of smart home products
- Insurance companies actively raising consumer awareness of smart home product benefits raise the level of interest in smart products, and GEICO is promoting smart devices to secure the home, including smart door locks, cameras, and leak detectors
To measure consumer interest in insurance packages, Parks Associates conducted concept testing for hypothetical fire safety and water safety options, for which consumers would receive discounts on their home insurance premium. Twenty to thirty percent of consumers are likely to purchase either package for an up-front cost of $200-$400, and consumers who have experienced fire or water damage previously are more likely to purchase a package specific to their past experiences.
Consumers who already have insurance (either homeowners or renters) see the value in acquiring smart home products when benefits are tied into their insurance benefits. Nearly 50% find loss detection/prevention products that automatically notify their insurer to be appealing. Discounts on insurance premiums provide the most-preferred incentive for acquiring smart home products. Almost 60 percent of consumers choose premium discounts over other types of incentives when asked what kind of incentive to buy smart home products. Smart product manufacturers can open a new sales channel and boost overall adoption through partnerships with insurance companies, which could provide co-marketing programs and product discounts for consumers.
For smart home shoppers, linking smart products to insurance services is also appealing. Among likely purchasers of smart products, 74% find automatic notification of insurers appealing.
Insurers can leverage this interest, and the benefit of convenience in expediting and validating claims, to differentiate their services and attract new customers. Nearly 40 percent of consumers report they would switch insurance providers in order to obtain smart home products.
- Over 80 percent of those likely to switch insurance providers are also likely to purchase smart home products with prevention features.
- Consumers who already own smart devices and those who subscribe to professionally monitored security are also more likely to switch insurance providers for more smart products.
Of course intention does not always equal action, so insurers need to calculate the impact these devices will have in mitigating risk and present those savings to consumers. Property and casualty insurers can manage risk and save money by leveraging smart home products to detect and prevent fires, flooding, and device malfunctions. Both home and auto insurers can use IoT sensor data to determine the most competitive premiums, provide personalization of policies, and engage consumers on a regular basis. By enhancing the connectivity between smart home technologies and the insurance services and providing a valuable experienced to end users, both industries can turn consumer interest into reality and create mutually beneficial market growth.
For more information about Parks Associates research, visit www.parksassociates.com.
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