On the face of it, Amazon’s partnership with Travelers - through which Travelers’ customers can purchase the retailer’s smart home products at a discount - appears to be little more than a typical customer expansion play. It provides Travelers with an opportunity to latch on to the customer reach of the world’s largest digital storefront, and Amazon can dip its toe into the insurance market. Both sides have something self-evident to gain from widening access to each other’s customers, and their storehouses of data.
Travelers may acquire more customers through the exposure, and Amazon will likely sell more of its smart home products. So far, so good, but nothing earth shattering. A policy discount in return for purchasing relevant devices is not so different from longstanding incentives for customers with a home security system, for example.
But in reality, this alliance is something much more plate-shifting, indicating a progressive direction for the insurance industry. For example, say every Travelers customer becomes eligible for a free Amazon Echo Dot, the voice-activated smart speaker system. This might appear a gimmick, but those who take the device home are effectively choosing to install what can be a sophisticated monitoring system in their homes.
This creates obvious privacy concerns, but it also points to the possibility of innovative new insurance products and consumer benefits. A device such as the Amazon Echo could theoretically offer a real-time window into consumer behaviour. That opens up a new avenue of personalised and value-added services, which could replace diminishing parts of the traditional policy revenue model.
For instance, we could begin to see policies priced around a device that can establish with much greater accuracy how often a customer is home. Perhaps a service is added that flags when a home’s water pipe bursts. Next, a valve is automatically closed off to stop the water supply, an order is placed for a new valve, and a repair contractor is dispatched to fix, potentially minimising damage on a major level versus today. Just as auto policies have been transformed by telematics, we could be on the cusp of smart home technology turning home policies into much more bespoke, personalised, and responsive products.
That causes us to revisit the question of privacy: Are consumers willing to give up some privacy in return for a better deal on their policy and a more sensitive batch of controls monitoring their safety? Consumers are savvier now about the value of personal data, and may be wary about simply handing it over for a slightly cheaper premium. This will require the industry to think creatively about how to offer reassurance on privacy, while accessing data that can allow for more dynamic pricing. There could be a role for trusted third parties, who could act as guarantors that data is not being used beyond the stated purpose, or resold without the insured’s knowledge.
We are not there yet. There is the need for more reliable access to home occupancy and usage data. Also, the need to develop a clearer idea of how to package said data into products and services that benefit the customer. The privacy implications must also be worked through. But those problems are unlikely to be insurmountable. In the next five years, we should expect to see transformed home policies in which smart home devices play a central role. The Amazon-Travelers partnership is not going to enact widespread change overnight, but it does indicate a direction toward rapid, radical, and increasingly digital, change.
The above was an opinion article written by Seth Rachlin, executive vice president and chief innovation officer, insurance, at Capgemini. The views expressed within the article are not necessarily those of Insurance Business.
