Technology will bring changes to insurance industry

AUTOMATED homes, or “smart homes”, will in the near future be of use to insurance companies to offer more accurate insurance premiums based on homeowners’ risk levels.

This is because the technology, which includes energy efficiency and home security that can be controlled remotely, can generate data about people’s behaviour and security levels. Risks like water leaks and fire can also be detected by a smart home before they become a problem.

Executive head of Hippo.co.za, Vera Nagtegaal says there is a strong likelihood insurers 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.”

If smart homes were to evolve in such a way that they could prevent risks before they occur, for instance alerting an owner to a water leak before it becomes a problem, insurance claims will decrease and significantly impact the insurance industry, Nagtegaal says.

“Instead of focusing on customers’ risks and offering reactive solutions, such as compensation for damage incurred after a burst pipe, 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.

While full smart home adoption is only in its early stages in South Africa, insurers are already considering the implications of the availability of this kind of data.

“Homeowners will benefit from the positive ways in which they modify their behaviour in terms of safety. Insurers would be able to run more efficient risk models and offer more affordable solutions to individuals who use technology to improve their home security,” says Nagtegaal.