Lack of innovation in home insurance can cause homeowners to be underinsured, and I've seen insurance companies seeking solutions to change the current landscape.
Auto insurance companies have accelerated the integration of tech-based solutions in their policies to provide better coverage to drivers. Auto insurers can analyze driving trends, like how often trips occur, the length of those trips and the speed at which the insured person drives. The data that is then delivered back to auto insurance companies allows them to better insure their customers and to reward customers who meet the “good driver” standard.
Home insurance is working to replicate a similar model using internet of things (IoT) technologies to learn more about the home they are insuring, including the activities that take place in the home that may cause harm.
I know this because, at my company, we work with many insurance companies on the problems they face in the innovation department to provide IoT smart home sensors. So, what’s home insurance’s biggest issue today, and how can fellow tech innovators in the space step up to solve them?
Constant Consumer Touch Points
The major issue I see -- and that my company is working to solve -- is the lack of knowledge home insurance agents receive after the application process. The home’s value and state of the property are generally only documented on day one, and there are little to no touch points afterward to collect new information that allows insurers to properly asses and update risks and the need for new coverage.
After talking with top insurance providers, I've heard that there is a distinct data gap between what insurers need and the information they end up collecting. At the root of the problem is how home insurance is purchased. Home insurance applications may include more than 60 questions and become strenuous for the insurance purchaser. Even if the information provided is correct, the home insurance agent often has no way to collect additional data on the home and homeowner without cumbersome interactions.
Using IoT And Other Technologies To Bridge The Gap
According to Statista (paywall), 23.9 million smart home device units were shipped in the U.S. in 2018, and that number is expected to rise to 29.4 million in 2019. Consumers are already purchasing these smart devices, like voice-controlled assistants or smart thermostats, to make their lives easier, and now insurance providers can arm them with more to improve the home insurance process.
Other innovators in the space can look to create smart-home products that help proactively protect consumer’s homes against different home-altering events. According to the Insurance Information Institute (III), about 30% of all home insurance losses in 2016 were due to water damage and freezing, making it one of the most costly claims. Creating technology that helps decrease or even prevent such disasters caused by water damage is a great option for startups looking to provide meaningful solutions for the insurance industry.
Beyond water damage, the III says weather-related claims such as wind and hail are very common amongst homeowners with 1 in 40 insured homes claiming property damage related to wind or hail each year. Wind damage can uproot trees, damage roofs or even collapse walls; and hail can damage roofs and harm windows, siding and more.
All kinds of technology could be employed to fill some of the gaps in the homeowner's insurance sector and beyond. While my industry, IoT, presents a large opportunity for tech companies to help mitigate damage to the home proactively, other tech could also be used to collect data on property-threatening events so that insurance providers can provide better coverage and better customer service.
Beyond IoT, companies can provide these services in the form of a mobile chatbot, a voice-controlled application or even a drone that helps accurately compile data and make interactions with insurance companies less cumbersome. I’d advise startups and even established companies looking to break into the InsureTech space to look at the major areas for improvement in insurance companies that consumers face, like customer service, getting accurate coverage and even the prevention of claims.
The insurance industry is ripe for change, especially in customer service, where IoT in particular provides opportunities for positive touch points with homeowners outside of reporting claims. Technology companies could help insurance companies provide rewards for good homeowner behavior, such as shutting the garage door or getting a leaky pipe fixed before it becomes a major claim. In addition to providing better customer service, these benefits could also go a long way to prevent claims.
Additionally, if insurance companies utilized technology to inform at-risk customers of weather patterns, they could sell additional insurance packages to help prepare customers for upcoming natural disasters. For example, FEMA reported that about 80% of households affected by Hurricane Harvey weren’t covered for floods. If these homeowners didn't live in a flood plain, they were likely not required by their home mortgage lender to buy flood insurance. By looking at weather-predicting technologies, insurance companies could help homeowners stay informed on both damaging weather and their current homeowner's policy.
The Future Of Home Insurance
Creating new kinds of technology can help the insurance industry evolve to deliver a proactive response to upcoming claims, instead of responding to them, which is the current model.
Home insurance currently lags behind auto insurance innovation due to the lack of a “good homeowner” definition. Homeowners don’t get tickets for leaving their doors unlocked, they don’t get clocked for high risk of fire damage and they don’t get their homeowner’s license revoked for reckless behavior.
By giving homeowners the tools to define the actions required for the best coverage, and by compensating them for implementing these tools into their daily lives, tech companies and innovators can allow for a new era of home insurance that's proactive instead of reactive. I would encourage other tech leaders wanting to find meaningful tools that address common pain points amongst homeowners to build a successful product.
