What smart homes mean for your premiums

AUTOMATED homes, commonly known as “smart homes”, will generate data about your behaviour and security, and in the near future this could mean that your insurer will offer you more accurate home contents or buildings insurance premiums based on your levels of risk.

Smart-home adoption is on the rise, and technology makes it possible for homeowners to adjust on their cellphones their music, ambient lighting or security settings. This is only the beginning.

According to the report “Smart home market – global forecast to 2024”, the smart-home market was estimated to grow from $76.6 billion (R1.07 trillion) in 2018 to $151.4bn by 2024.

The benefits include energy efficiency, systems user functionality, and – of particular interest for South Africans – home security. These can all be controlled from a phone or other mobile devices, allowing remote users to activate alarms, set zones or monitor movement within their property. Risks such as water leaks and fire could also be detected by a smart home before they become a problem. This will have implications for insurance.

According to Vera Nagtegaal, the executive head of Hippo.co.za, there is a strong likelihood that insurance companies will start to offer solutions similar to telematics for cars that offer discounted premiums based on responsible behaviour.

“In future, interactive apps might allow you to update your policy details in real time, by, for example, adding a new security feature that will alert you to risky behaviour, such as leaving your window open at night, and this could affect your premium,” she says.

In addition, if smart homes were to evolve in such a way that could prevent risks before they occur – for instance, alerting a homeowner to a water leak before it becomes a problem – insurance claims will decrease as a result and impact the insurance industry significantly.

“Insurance providers will have to look at new opportunities that are presented by smart-home technology,” Nagtegaal says. “Instead of just focusing on customers’ risks and offering reactive solutions, such as compensation for damage incurred after a pipe burst, for example, insurance value propositions will have to shift. Products should be adapted to provide solutions in real time that are pre-emptive, to prevent risks from occurring in the first place.”

One example is the Homies alarm platform by Dutch insurance company Achmea and Accenture, which connects home security systems with neighbours, friends and families, to assist each other in case of a fire or burglary.

All in all, the smart-home revolution is likely to create significant benefits for homeowners. But, as with every new advance in technology, there will be adoption hurdles to overcome before full and efficient functionality – and home security – is achieved.