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Anyone who owns a home is familiar with the perils of snow storms, floods and burglars, and ideally has invested in insurance products that protect them from major losses. They might also be one of the thousands of American homeowners who have already hooked up their properties with sensors that can alert them and their insurers of heavy snowfall on roofs, trespassers in backyards, and even leaky faucets in bathrooms.
“The US market has seen substantial year-over-year growth in the number of connected homes, and this is expected to increase in the years to come,” said Bob Cummings, vice president and global head of insurance for SAP Financial Services Industries. “In 2018, revenue in the smart home market is now $18.87 million and household penetration in this market is at 32% and expected to hit 53.1% by 2022, according to Statista. Gartner predicts that a typical family home could contain more than 500 smart devices by 2022.”
Customers are already bringing sensors into their cars that help insurance companies determine more accurate premiums based on driving behaviors. Likewise, the connected home offers advantages for both its residents and insurers.
“Sensor data can provide a real-time pulse on a home. This information can provide insurers with a wealth of knowledge in terms of any impending risks and ensure that homeowners take proactive steps to avoid them,” said Cummings.
“If the insurer realizes that, over time, the home is located in an area where the threat of flood is increasing, they can provide the homeowner with additional coverage offerings or products that better fit their needs. This type of personalized service ensures that insurers are providing a more enhanced customer experience that will lead to increased satisfaction and loyalty.”
In some cases, insurance companies work with security service suppliers, and provide discounts for homeowners who have installed connected devices because they’re preventative and reduce claims. In the future, sensor data might be directly connected to a homeowner’s insurer, just like telematics devices in the auto space, explained Cummings.
Entire cities can also benefit from using connected sensors.
“A great example is the city of Buenos Aires, which has high flood rates. The city government turned to SAP to help them mitigate the risk of flooding,” said Cummings. “The major issue was that storm drains were not clear for the water to drain away properly after torrential rains. With SAP HANA and SAP Mobile, the city is able to analyze real-time sensor data using an automated system. With this data, they can notify residents with weather alerts. Using the sensor data, the city of Buenos Aires can ensure that the storm drains and water ducts are clear when it matters most to prevent flooding.”
As sensors for homes become more popular, the technology has improved and prices have gone down, making them more accessible. Even the advanced systems can be purchased for a few hundred dollars, though many people choose to subscribe to services rather than taking on yet another home improvement task for the weekend and installing the hardware themselves.
“A report from The Boston Consulting Group predicts that claims for insured homes will fall by 40 to 60% if all the latest technology for water, fire and burglary alarms is adopted,” said Cummings.
“New business networks from State Farm and ADT now offer protected, connected homes. State Farm provides customers with a host of smart home connected products and services to provide wireless home monitoring using ADT Pulse for home automation and ADT Health for medical alerts. Homeowners can easily stay connected, save on energy costs, automate their home, and receive alerts of potential losses.”
