By: Amit Chopra, Thought Leader and Digital Strategy Execution Specialist

Homes are getting smarter and insurers want to ride this wave of enchantment!

The smart home market is expected to be north of $121 billion by 2022, with a projected growth rate of 14% between 2016 and 2022. Lighting control, home security & access control, HVAC control, home healthcare, entertainment systems, and smart kitchens, are the prime movers of the connected-home movement. Innovators are marching ahead to make smart homes a reality, where enchanted objects secure your home, alert you to any fire or water leaks, conserve energy and help you stay connected with your loved ones. As consumers enrich their dwelling experience through smart gadgets, insurers are exploring this opportunity to both increase the revenue, and gain greater control over the claims.

The Insurance Information Institute reports that about 1 out of every 15 US homeowners’ insurance policyholder files a claim each year. For insurers, smart consumer homes could lead to a smarter and better bottom-line, and drive up consumer satisfaction ratings.

• ​Averting a claim incident: The continuous stream of real-time data, can help in predicting and averting possible failure events — an averted incident translates directly to savings in settlements.​​
• Efficiency and better underwriting: The barrage of new data can help insurers better their risk-analysis models, and ease the process of claims handling.
  • A smoke detector capable of alerting the fire department could save a carrier $35,000 in average home insurance payouts.
  • Business Insider Intelligence estimates that IoT devices that track drivers’ habits in real-time, could save auto insurers $45 billion over the next five years.

Customer Adoption Trends & Concerns

A recent PWC survey found that over 80% of American internet users are aware of smart home technologies, and 26% already own at least one smart home device.

However, there are hurdles that need to be overcome to make smart homes the norm. There are the ‘expected’ concerns about inter-operability and seamless integration of the connected devices. And then, there are more serious issues that concern data privacy and consumer protection.

For some ‘is my thermostat is compatible with the new motion sensors in the market?’ could be an important consideration, but most consumers will likely be more concerned with the prospect of losing their privacy, or breach in home security in the event of an unauthorized hack or intrusion. ​

Smart homes meet blockchain

Smart home device applications built on centralized client/server architecture, may suffer from vulnerability and distributed denial of service attacks. Blockchain promise transaction immutability, and can keep the smart home network in sync to deliver a unified, seamless experience to the end-user and to stakeholders. Feeding the IoT device data to private blockchain, will allow the device data and state to be updated across the network. The distributed ledger will ensure secure role-based access, transaction verification, disputes resolution, and accountability. Smart contracts can be written to define the role, responsibilities and liabilities for each of the stakeholders.

Industry Standards & Alliances

Earlier this year, several tech giants and startups came together to form the ‘Blockchain IoT protocol initiative.’ The consortium includes technology leaders such as – Cisco, Foxconn, Bosch, Ambisafe, BitSE, Chronicled, ConsenSys, Distributed, Filament, Hashed Health, Ledger, Skuchain, and Slock.it, amongst others. The primary objective of this consortium is to develop a shared IoT blockchain protocol that can connect everyday IoT gadgets to the internet, and address issues related to integration & interoperability.

Leading European insurers and reinsurers launched the ‘Blockchain Insurance Industry Initiative (B3i)’ in October 2016 to explore the potential of the distributed ledger technology. The initiative started with five members, and has since grown to 15 members. The consortium wants to explore how blockchain can st​reamline paper work and reconciliations for (re-) insurance contracts; and accelerate information and money flows, while greatly improving auditability​​

Conclusion

Enabling smart homes is going to be a big business opportunity for insurers, and not just only for device manufacturers and technology companies. Leading insurers have already jumped on the smart home bandwagon, with many pairing up with system integrators/ providers to offer discounted installation and monitoring fee. Insurance, an industry that’s driven and consumed by data, IoT and blockchain, can offer tremendous value through robust real-time data preservation, visibility, transaction sanctity and immutability.

Not just the homes, insurance is also getting smarter, and their customers – enchanted!