Thanks to our friends at Insurance Business America –
Author: Caitlin Bronson – October 20, 2015 |
A decade ago, telematics devices revolutionized a significant portion of the auto insurance industry. Today, the usage-based insurance model is coming to homeowners policies, and raising serious questions about privacy along the way.
In the past year, four leading home insurance companies — American Family Insurance, Liberty Mutual, State Farm and USAA — have announced deals with companies that provide “smart” products for homes. These devices monitor and control certain of the home’s major appliances and in exchange for using them, policyholders receive a discount on their premium. The insurance companies then receive a large amount of data on how their customers live.
“These are double-edged products,” Bob Hunter, insurance director for the Consumer Federation of America and a former Texas insurance commissioner, told the Chicago Tribune. “If properly controlled for privacy and only installed with the policyholder’s permission and total transparency, they can make a home safer and reduce the likelihood of death and destruction, but without strict protections, these could be a threat to a family’s privacy and intimacy.”
Such is the access these devices have that Canary, one of State Farm’s partners, once recorded a baby’s first steps. This is no small worry to consumer advocates concerned over privacy.
Already, roughly half of insurance policyholders view the use of telematics devices negatively, according to a 2014 survey from Deloitte. This is especially prevalent among older consumers – in other words, those most likely to own a home and benefit from the “smart device” discount.
Nevertheless, it is likely that demand for telematics and the discounts it provides will grow. Younger homeowners will begin to influence the market, and the use of surveillance technology by insurers may gradually become more accepted.
And insurers argue that their devices, in addition to giving a premium discount of about 5%, also help make homes safer.
“These technologies provide the opportunity for consumers to reduce the chance of harm to their family and home by detecting events that trigger alerts on their smartphones, wherever they may be,” said Michael Robon, senior vice president and property product manager for Liberty Mutual Insurance. “We believe customers seeking to monitor their homes with devices like Next Protect demonstrate responsible behavior. As a result, we will be offering these customers reduced pricing on their home insurance policy.”
Not surprisingly, then, Deloitte concludes that “the genie is out of the bottle.”
“The industry as a whole is not likely to go back to relying on its traditional methods of assessing auto risks,” the analyst said in its report.