When Will the Internet of Things Penetrate Personal Lines?

Nearly a quarter (24%) of independent agencies would like carriers to address smart homes in the next two years, according to the 2018 Future One Agency Universe Study.

While jumbo agencies are most interested in carriers addressing the Internet of Things for commercial lines (36%) and using artificial intelligence to improve risk underwriting (36%), small agencies in particular are most interested in carriers addressing smart homes (31%).

But according to industry experts, risk management offerings like leak sensors and insurance solutions for internet-enabled home devices like TVs and refrigerators still have a long way to go.

“It’s going to be a while before we’re going to see real IoT adoption from a personal lines standpoint,” says Ellen Carney, principal analyst, digital business strategy at Forrester Research, Inc. “Consumers are buying smart home devices, but the problem is there’s no ecosystem to capture the data from these devices and then share it in a meaningful way” [see sidebar].

“In the short-term, there’s a lot more opportunity for the IoT on the commercial lines side, because on the personal lines side, it really requires consumer adoption,” agrees Mark Breading, partner at Strategy Meets Action. “Right now, it’s kind of like the Wild West. There are all kinds of devices and companies selling them, and individuals have to install this stuff themselves.”

Plus, consumers still have serious privacy concerns regarding in-home devices that track and relay their behavior patterns to third parties. Consider that when Forrester asked what would be an appropriate discount for sharing smart home data with an insurance company, the average respondent wanted $200.

“When the average homeowners premium is about a grand, that would require basically giving all your profit away,” Carney points out. “It’s the creepiness factor. People don’t want their insurance company to know they walk out of their house without locking their back door when they’re getting a discount for the ADT system.”

Jay Sarzen, senior analyst on the insurance team at Aite Group, a financial research and advisory firm, believes “there will be gradual acceptance” of IoT devices like leak detectors—“anything where you’re not monitoring behavior,” he explains. “There’s going to be more of an appetite for that than there would be for the IoT of tracking whether you’re changing the batteries in your smoke detectors.”

Jacquelyn Connelly is IA senior editor.

Data Deluge

Data capabilities vary by carrier, but “on the whole, the industry is not in a position to absorb and synthesize all this data itself,” Sarzen says. “That’s why there’s this cottage industry of all these Insur­Techs rising up to say, ‘Hey, you guys can hardly get a handle on the names and addresses of policyholders. You think you’re going to be able to interpret driving data?’”

Many InsurTechs are focusing on creating integration solutions that incorporate data into all kinds of carrier processes, from underwriting to claims to user experience.

“If carriers are willing to work with some of these emerging providers that can help them manage all that data,” Sarzen says, “the IoT opportunity improves substantially.” —J.C.