Insurers not responding to benefits of smart-home devices

Published: December 28, 2016

Updated: July 24, 2018

Author: Luke Jones



Connected devices are changing homes, using the Internet of Things (IoT) to empower owners to make their homes safer, more secure, and efficient. However, the insurance market has not yet caught up to reflect the changes connected devices make and customers are not getting discounts.

A new report from ABI Research shows that the connected device market is growing quickly in the US, and will quadruple over the next four years. Despite this, insurance premiums have remained unchanged even though connected devices make a home more secure and environmentally friendly.

Homeowners are increasingly turning to Wi-Fi connected devices like lighting, smoke detectors, security cameras, anti-leak systems, and automated locks. These devices can be remote controlled away from a property, giving owners more control over their home. IoT devices help to make homes secure, efficient, and reduce the impact of some weather events.

Insurance providers in the United States have not caught on to this development and home insurance rates are expected to rise in 2017. A report by the Wall Street Journal points to little concessions being made for home security. Clearly, insurance companies are concerned that improved home security will eat into premiums and eventually revenues.

This is a genuine threat too. A Morgan Stanley and Boston Consulting Group study in 2014 predicted that smart-home devices could cut potential losses by 40% to 60% and reduce premiums globally by between USD $32 billion to $47 billion over the next 10 years.

Sean O’Neill, a partner at consultant Bain & Co, said that connected-device technology “changes the underlying need to have insurance.”

“If you take down severity and frequency of losses, that’s basically what premium dollars support,” he told the WSJ. “So the question is, at some point do premium dollars fall significantly?”