From water sensor LeakBot to home security system Cocoon, smart devices are set to change how the insurance industry protects our homes. The need for proactive innovation against rogue devices is creating interesting opportunities for both startups and investors.
There are now more internet of things (IoT) devices on Earth than there are humans, and the global smart home market is forecast to be worth an impressive $35 billion by 2020. As exciting as that is for the technologists and the futurists of the world, another sector is making ambitious plans for its IoT-filled future: insurance.
Little black boxes have already transformed car insurance, but the next frontier for the insurance industry lies in the home rather than the garage. Smart devices offer insurers the chance to collect more data than ever before about their customers’ behaviour, as well as learn about the risks and opportunities that exist in people’s domestic habits. Incentivising customers to embrace the IoT will be crucial if the insurance sector is to gain from this emerging tech.
For this reason, multinational insurance firm Aviva is already offering cheaper premiums to those who install smart sensors at home, and they’re kicking off by tackling one of the industry’s biggest concerns: water. Escape of water claims are the single biggest cost for home insurers, making up a quarter of all home claims paid out. It’s not too surprising, then, that Aviva’s first push into the world of IoT is issuing their customers with LeakBot, a smart sensor that attaches to pipes and sends push notifications to customers’ smartphones if a leak is detected.
The technology behind smart sensors like LeakBot is remarkably simple, but it’s only recently that the cost of manufacturing chips has plummeted enough to make them viable for mass market. Insurers all over the world are now eyeing ways to use these devices to help them get ahead of claims before they happen. The industry will transform itself from reactive repair service to proactive prevention service as insurers drive widespread adoption of IoT in 2018.
Canary (US) and Cocoon (UK) are security systems that integrate smart cameras and microphones into homes. These devices have been steadily gaining momentum and popularity, particularly in the US thanks to news stories about burglars being caught out by them. Zurich Insurance offer their customers discounted home coverage when they buy Cocoon devices because, like Aviva, they see how the data they collect from these devices can revolutionise their business models.
IoT devices offer the opportunity for smarter services and more seamless customer interactions, but there are practical questions over how eager consumers will be to welcome these technologies into their homes. Installing a smart meter in your electricity cupboard is one thing, but is the idea of cameras and microphones in your bedroom really that appealing? What certainty is there that a home video feed won’t be hacked?
According to a report by Corero Network Security, lack of sufficient security in IoT devices caused cyberattacks to rise 91% this year. More than 100,000 IoT devices were hijacked in an attack that temporarily shut down Twitter, Netflix, Amazon and PayPal in an attack that affected millions of users last October. Only early adopters are involved with the IoT so far, but the impact of just one attack was still felt widely. As more and more smart devices are installed, the security risks and potential consequences grow more serious. But it’s not all doom and gloom.
As the insurance industry accelerates the adoption of connected homes, it will create an enormous opportunity for innovators who can provide protection from cyberattacks. If the insurance industry is serious about focusing on prevention, rather than compensation, then it needs to think carefully about how it can make homes safer, not just smarter.
Pioneering startups and ambitious investors who develop security solutions for the IoT will find themselves pushing the insurance industry straight into the future – and reaping the rewards, just as a plethora of fintech startups have in the banking sector.
Companies that tackle and succeed in securing the IoT will shape the future of the connected home, smart city infrastructure and the insurance industry’s growing data collection needs. For investors, the challenge is identifying teams with the vision and skills to deliver the solutions of the future. For startups, the challenge is understanding how their innovations can help legacy industries transform and succeed.
About Dominic Wilson:
Dominic is co-founder and managing partner at Pi Labs. He leads the firm in a general capacity with a specific focus on investments and investors. He also sits on the boards of Brolly, FalconDHQ and Office App. Dominic has a wide background in Private Equity Real Estate having worked with both AEW Europe and Savills Investment Management and transacted over €3bn of deals across Europe. Dominic has a degree in Law with French from the University of Birmingham and an MBA from the London Business School.
About Pi Labs:
Pi Labs is Europe’s first VC firm to focus exclusively on proptech investments. It has established itself as a pre-eminent global leader in the early stage proptech domain. To date, it has made 28 investments including Airsorted, Brolly, Land Insight and Plentific. Pi Labs is global in its focus – it has backed founders from 17 different nationalities and regularly receives investment proposals from over 50 countries worldwide. Pi Labs has become the centre of the property innovation ecosystem with a deep track record in real estate, technology and investment .