Historically, the insurance industry has relied on imprecise risk assessments. But what if carriers could gather data to better understand their insurance risks? Or to prevent costly damage in the first place? Smart home and property technology can do just that.

An IoT device is any “thing” that connects to the internet — hence the name Internet of Things, or IoT. Also called smart home devices, they’re designed primarily to make life easy for the end consumer. However, they can also collect and send data to authorized third-party users. Learn why combining IoT and insurance makes sense for everyone, and how to offer smart products on a larger scale.

Recommended Smart Devices for Home and Small Business Owners

In terms of which smart devices make the most sense from an insurance perspective, consider environmental sensors to alert home and small business owners to potentially catastrophic conditions, as well as escalated professional monitoring to provide extra peace of mind for owners.

Notion, the leading smart home insurance provider, advises the following:

• Water leak sensors
• Temperature sensors
• Garage door sensors
• Window and door sensors
• Alarm sensors

Notion Sensors are unique in that a single sensor can monitor for more than one thing. For example, a sensor in the garage can monitor the temperature and whether the door opens or closes.

Benefits of Adapting Smart Home and Property Tech to the Insurance Industry

From a carrier’s perspective, there are several benefits to prioritizing smart technology.

Prevent vs. React to Damage

Smart sensors allow policyholders to receive alerts even if they aren’t at their property. They can then choose whether to alert a business partner or neighbor or to connect to service providers to address the issue promptly. Carriers reap financial benefits thanks to this prevention model, reducing claims up to 30%.

Incentivize Low-Risk Behavior Among Policyholders

Insurance carriers can also collect data from smart sensors — including whether the devices are online — and use it to identify low-risk policyholders. They can encourage further low-risk behavior by offering discounts to policyholders who keep their system online. Some insurance companies have been able to reduce premiums by 20% thanks to IoT and professional monitoring. Others, such as Liberty Mutual or American Family Insurance, offer a 5% discount just for installing a particular device. Advertising these discounts can attract even more low-risk property owners to an insurance company.

Create New Revenue Streams

Getting into the IoT market allows insurance carriers to generate new revenue streams, as well. According to Policy Advice, an independent insurance reviewer, the IoT market is forecasted to generate over $520 billion by 2027. In other words, people are already going to purchase these items, so they might as well purchase them through their trusted insurance partner.

Improve Brand Perception and Relevancy

The insurance industry is rarely described as innovative, and that’s exactly why insurance companies should embrace IoT: it helps them stand out as forward-thinking, tech-savvy, and customer-centric providers. AM Best has even begun evaluating innovation when rating insurance companies. To be leaders in the industry, carriers have to incorporate tech.

IoT and Insurance Partnerships Key to Success

Carriers interested in a smart home program don’t have to reinvent the wheel. Companies like Notion, a Comcast company, launch pilot programs on behalf of insurance companies to ease the burden on internal teams and resources, reduce costs, and shorten the time to market.

Carriers also enjoy larger returns when they have more devices installed. For example, when transitioning an install rate from 70% to 80%, professional monitoring may also see an increase in adoption up to 20%, offering more revenue to the carrier. To reach this level of installation success, carriers need to scale up quickly and intelligently with a phased, partner-based approach.

Such a partnership ensures the program smoothly transitions from ideation to a full-scale rollout and extension. Partnering with an established and experienced IoT company also mitigates the risk of security breaches, which could not only impact data accuracy but also has the potential to damage the carrier’s brand image.

Connected Home Insurance Is the Future

Many carriers — including Hippo and Nationwide — have already partnered with Notion to become connected home insurance companies. As more carriers come on board, IoT technology will no longer be optional. Forward-thinking insurance carriers must use IoT now to make sure the competition has to keep up with them, not the other way around.