Viewpoint: Mars Mission Should Inspire Insurers to Embrace Smart Home

In February, an unprecedented winter storm left millions of Texans crippled without power, burst pipes, and compromised water. Homeowners were left both helpless and unaware of what to expect as a bitter cold created chaos across the state.

In parallel, the National Aeronautics and Space Administration’s Perseverance probe was landing on Mars within inches of its target, after traveling nearly 300 million miles. At a total program cost (inflation-adjusted) of approximately $2.9 billion, Perseverance was less than 15% of the anticipated property and casualty losses of the Texas disaster, now totaling well over $20 billion. Yet, smart home technology, already in the market, could have been leveraged to minimize these losses for well under $1,000 per home.

The Texas freeze is not an isolated incident. Insurance companies are now reckoning with the increased frequency and severity of catastrophic events, while decades-old claims management systems and backlogged claims get in the way of adopting new technology. According to a study from the Yale School of the Environment, these issues aren’t going to disappear: climate-related disasters jumped 83 percent in the past 20 years. Major floods have more than doubled, the number of severe storms has risen 40 percent, and there have been significant increases in droughts, wildfires, and heatwaves.

Thousands of rushed decisions and wrong turns led Texas to the aftermath of this blizzard. However, when looking at the big picture, some of these painful consequences could have been mitigated for Texans.

How?

Insurance companies invest in preventative solutions that limit home issues that can turn from bad to worse, like a frozen pipe that later bursts due to temperature extremities. In fact, with smart home technology, we have the potential to avoid instances like these entirely.

The Smart, Networked Home

The typical U.S. broadband “smart” household has an average of 10.5 connected devices, across home, entertainment and health products. When we speak of a “truly” smart home, we’re looking beyond automated light bulbs, a voice-assisted speaker, or the ability to supervise your pets from the office.

Rather, this smart home has a network of devices and sensors that prevent water pipes from freezing, grease fires, theft, or even the occasional washing machine explosion. Currently, smart-home technology at this level of sophistication isn’t as cost-effective as we might like, hampering mass adoption, but the tools are commercially available. According to International Data Corp., manufacturers prioritize developing security gadgets, which will hold about 23 percent of the smart-home market by 2023. Even more optimistic, there are already seven billion connected internet-of-things (IoT) devices available in the marketplace.

The possibilities should excite both the insurance industry and homeowners: Whole-home water shutoff valves to avoid costly leaks and flooding; self-extinguishing stoves that can prevent dangerous cooking fires; wireless presence detection systems that can alert security quickly, preventing in-home theft; the possibilities are numerous. But none of these extraordinary IoT technologies that can help insurers avoid loss will get anywhere without the industry’s active commitment and participation.

How can we push towards a more productive, safer, and protective future? An excellent example of this can be seen in the adoption of telematics in the automotive insurance industry: Auto insurance carriers are now looking widely at telematics to offer an emerging type of vehicle insurance in which an electronic app or a “black box” is built into a vehicle or added afterward and reports the precise performance of the vehicle and individual driver. Safer drivers are rewarded and incentivized to make better decisions behind the wheel

This type of technology has been available and evolving in sophistication for 15 years, but it didn’t take off until enough insurance companies were willing to adopt it for consumer utilization. This will be the case with home insurance; we can’t risk not embracing safer, smarter technology to become widely accepted.

Historically, progress follows unprecedented losses. This is the wrong way to make impactful, preventive changes in the industry — we can’t afford to continue on a path of unfortunate events happening in order to make changes. To encourage adoption, and therefore safer and more resilient homes, we need to remove barriers to entry.

Real-World Applications

Just like telematics, smart homes have a process-oriented solution and provide convenience to customers.

A smart home can sense a leak in the washing machine and detect if you have flooding. It can also shut off the water and, one day, will book a hotel room for your family if your house is damaged. Hot water tanks have a life span of about 14 years — if your’s is old, a smart device can catch dripping and shut off the valve to save you from continuous water damage. If the temperature in a house is rising, a smart home can detect a fire, calling emergency dispatchers immediately. The list of benefits goes on.

When it comes to real-world application, these technologies could prevent a big blow to insurance claims and damage costs — shutting off pipes to avoid bursts or alerting service providers when vulnerable households lose power. Using live data to anticipate and track severe weather events, claims teams from different insurers are equipped to reach out in advance to protect homeowners, recommend that they leave the area or prepare for losing power or water. For instance, as weather conditions worsened and the probability of a freeze became inevitable, homeowners could have been cautioned and coached through necessary steps in real-time — and these steps could be automated and explicitly directed at that homeowner’s residence.

This, in effect, will fundamentally transform the dynamic between homeowners and home insurance companies — from a transactional relationship to a partnership.

Benefits to Insurance Companies

As the world automates and innovates, we must recognize the possibilities that sophisticated technology offers the home insurance industry, which hasn’t really changed in the past 100 years. Sustained growth in technology and global availability in products continues, but we need to invest in adopting these new technologies, even if the return on investment isn’t immediate. Because if we dig in now, the effect of the IoT on our future will be tenfold.

In the same moments Texans were grappling with the systematic breakdown of their utilities, the world watched in awe as NASA safely landed the Perseverance rover on Mars. While nothing about its success was certain, NASA’s huge financial leap of faith and investment in technology paid off.

Home insurance companies need to embrace new technology, not shy away from it, to prepare for the very real future of more frequently occurring extreme weather and defend our customers and our industry from the threats that will emerge. This is a call for active commitment — our customers’ safety and wellbeing are so worth it.

About the photo: This April 7 photo, taken from the Ingenuity drone, shows the Perseverance probe on the surface of Mars. Photo courtesy of NASA.