The Internet of Things could transform personal lines

The Internet of Things (IoT) is an umbrella term for a collection of everyday household devices that communicate with each other through the internet. They may also be referred to as “smart” devices: smart appliances, smart thermostats, smart televisions and smart speakers, among others.

These devices generally offer consumers a more convenient and feature-rich at-home living experience. When working correctly, they form a network that can help track a home’s usage habits, provide helpful recommendations or warn against impending dangers, like fire and water damage.

In recent years, an increasing number of homeowners, especially younger ones, are adopting these internet-connected devices and appliances.¹ According to McKinsey & Company, approximately 127 new smart devices connect to the internet every second; by 2023, the number of connected devices is expected to reach 43 billion, a threefold increase from 2018.²

Consumers consistently report home security as their most valued IoT feature, and one survey found 47% say their greatest return on investment derives from environmental devices such as smart thermostats that reduce utility bills. The study found 86% live in a home with at least one smart device, usually speakers or televisions.³

Because the IoT can help prevent losses and also encourage homeowners to engage in protective behaviors, the insurance industry has taken a proactive approach to address its evolution. Smart home technology could have a profound impact not just on policyholders but also on property and casualty (P&C) insurance lines. Going forward, agents need to have an understanding of the benefits and potential risks.

The benefits of the IoT

There are a number of areas where the IoT can benefit homeowners:

Home security — Smart doorbells, locks and cameras are popular IoT items that afford homeowners peace of mind. Cameras can monitor homes for unwanted visitors, and smart doorbells allow for communication even when no one is home.

Appliance and utility monitoring — Another popular feature, smart thermostats, save on heating and cooling bills by automatically turning off temperature controls when they’re not needed. Water use can be monitored and rationed in geographic areas where it’s scarce. Pipes can be assessed for freeze risk. There is also a convenience factor to these devices; for example, there are refrigerators that notifies the user when groceries are low.

Catastrophic event protection — Smart sensors can warn homeowners about impending fire, water or carbon dioxide dangers. Monitoring humidity can guard against mold. Smart smoke alarms can prevent false alarms by interpreting smoke data.

Monitoring family members — Cameras and motion detectors can monitor those left at home—such as children, the elderly or pets—when the homeowner is not there. Activities can also be monitored; for example, these devices can surveil whether someone is smoking.

Entertainment, convenience and lifestyle — Entertainment add-ons, such as voice-activated televisions, are some of the more popular IoT functions. The convenience of voice-activated virtual assistant technology, such as Alexa, is another. Some IoT consumers report an overall enhancement in quality of life. One example of this would be replacing a blaring alarm clock with a combination of soft music and slowly brightening bedroom lights while waking up in the morning.

While offering many possibilities for homeowners, IoT could have a substantial impact on the insurance industry. The most significant technology is in-home sensors that guard against losses like water and fire damage, substantially reducing claims and thereby shifting our industry’s fundamental focus from reactive to proactive, from curative to preventive. The IoT could be a game-changing development that alters the integral structure of personal lines and our relationships to policyholders.

Security measures

Each connected smart device represents a point of entry, a potential weakness to be exploited by cybercriminals. Fortunately, there are many IoT-security best practices that reduce exposure without requiring a high degree of technological aptitude.

The Wi-Fi router is probably the most frequently targeted security element.

• Change the router’s default name since it may include its make and model. The new name should contain no personal identifiers.
• Use a strong password, at least 12 characters, mixing uppercase and lowercase letters, numbers and symbols, with no personal identifiers.
• Create a second “guest” network, which many routers allow. Run IoT devices on one network and the more important devices, like cellphones and laptops, on the other.
• Use the highest level of encryption offered.⁴

Networked devices are also susceptible to infiltration. These are the devices that run on the router.

• Use a strong, unique password for each device. Yes, this is annoying, but use a digital password management tool if it’s difficult to keep track.
• Disable unused features. If remote access is never used, turn it off. That’s one less entry point.
• Always update firmware and software when prompted.
• Enable multifactor authentication on all devices.
• Research every device since a network is only as strong as its weakest component.

Give your customers peace of mind with smart home technology through Nationwide

To help bridge the gap between early- and mass-market IoT adoption, Nationwide is partnering with Notion Smart Home Monitoring System* to provide members with a smart home insurance solution to protect against water damage.

Water damage is the source of most insurance claims. About 29% of all claims are water-related, and about 1 in 50 insured homes have a property damage claim caused by water damage or freezing each year.

Although the most common risk, water damage is also the most avoidable. The Notion system helps prevent overflowing bathtubs, frozen water pipes that burst, sewer backups, sump pump failures and more.

All members have to do is place Notion’s sensors near doors, windows, smoke and carbon monoxide detectors, and water sources. Once installed, the sensors watch for any unusual activity, helping to prevent problems that might become catastrophic or costly later on.

The program offers a discount on property insurance, which averages about $50, plus an almost 50% discount off the price of Notion’s devices.

Though they rarely speak to their insurance agent about these products, 64% of homeowners have expressed interest in smart home devices if it means lower insurance premiums.⁵

Nationwide helps make such conversations easier by offering clear, customer-friendly information on how coverage might be impacted by owning these devices and on smart monitoring in general. Download this infographic to share with your customers and start the conversation about the exciting and rapidly evolving new possibilities of the IoT.