By Matt Poll, co-founder & CEO of Neos
Like a pile of laundry or stack of dirty dishes, traditional home insurance can feel like a chore. Home insurance seems detached from everyday life and its role as a supposed ‘security blanket’ is paradoxical because of the stress caused by drawn out admin and unexpected T&C’s.
Today, things are changing – technology has created an opportunity for insurers to step outside of their restraints and provide policies that encourage an authentic relationship between policyholder and policy provider. By utilising smart home technology, such as cameras and sensors, new innovative insurtech businesses are able to offer customers access to ‘smart home insurance’ which renders tangible value not only for the customer but also the insurance provider.
In order to fully understand why the insurance industry is ripe for disruption, we must first take a look at the issues underpinning traditional home insurance in its current form.
A look at the industry pain points
In the current landscape, the distrusting and distant relationship between the consumer and insurer is a major industry pain point. Having worked in the corporate world of insurance for over 15 years, I have seen first hand, the underlying problems that are contributing to the breakdown in the relationship between consumer and insurer.
It is influenced by a number of factors that stem directly from the structure of the traditional home insurance offering. Namely, stand-alone insurance policies promising protection only after damage has occurred.
This means that, for the majority of cases, the only interaction a customer has with their insurance provider is following a negative experience, such as damage to their house through fire or flood, or perhaps theft. As such, it is not uncommon that a customer making a claim may feel vulnerable and upset during this time. The complexity of making a claim and a perceived lack of sensitivity can ultimately add to the sense of distrust between the two parties. Ultimately, this is the last thing a customer wants and needs.
On the flip side, for customers who never make a claim, their insurance provider is completely detached from their everyday life. Customers pay money for a piece of paper that is left in a drawer to grow dusty and untouched until they need to make a claim or renew their policy. In an age where technology has connected so many services and people, the feeling of remoteness is no longer acceptable. Home protection should be built into our lifestyle, not simply a forgotten accessory that we occasionally look to once damage has been done. With technology, our relationship with insurers can feel more personal.
Sense of distrust
Another pain point is that although traditional loyalty rewards sound like a favourable bonus to insurance offerings, the reality is far from exciting. Some incentives, such as a ‘no-claims discounts’, pressure policyholders into not claiming, as they look to secure a discount the following year. Ultimately, this restricts rather than empowers customers, making a claim when they need to, especially as with no claims discounts there’s usually no difference between fault and non-fault claims.
An added disadvantage for loyal customers is evident when it comes to loyalty penalties. Research from Citizens Advice found that 1 in 3 home-insurance customers could be paying up to 70% more than a new customer. Last year, Citizens Advice issued a “super-complaint”, calling on the Competition & Markets Authority (CMA) to bar companies from unfairly ratcheting up premiums charged to loyal customers whilst offering low rates to incoming customers.
Insurance should make you feel safe, not as if the insurer is there to catch you out with hidden schemes and penalties. Loyalty should truly be rewarded, without any T&Cs attached.
Welcome home Insurtech
The good news is that, thanks to technology, the relationship between insurers and policyholders is changing. By leveraging smart home technology new insuretechs are able to provide customers with real value throughout the relationship – not just a piece of paper and a promise – by installing devices such as smart fire alarms, window sensors, leak detectors and smart cameras that enable customers to monitor their home’s activity.
Unlike traditional home insurance, this allows a more proactive approach to insurance that is more beneficial to both the policy holders and insurers themselves. For the policyholders, making use of these devices empowers them to be alerted of oncoming threats before extreme damage has been done and act upon this knowledge. For example, a leak sensor will be able to pick up a slow leak early on. This will alert customers before it becomes a serious issue and can lessen the shocking £707million Brits spend each year to repair damage caused by water leaking into their home from their neighbour’s property.
Other products like smart cameras can be linked to an app on a smartphone, allowing users to keep an eye on what’s going on at home no matter where they are in the world. This equips people with the peace of mind that their home is safe when they’re out and about – whether working late, away on holiday or just out socialising. Rather than feeling like a detached accessory, technology allows insurance to take the form of a hands-on protector that users are constantly interacting with.
Furthermore, insurers who encourage their policyholders to make use of the added protection that smart home technology offers, are positioning themselves at an advantage. With increased preventative measures in place, policy holders are more likely to be alerted and report damage before it happens. This means insurers will spend less money on damages because fewer incidents occur.
Insurers and policy-holiders alike need to recognise the benefits technology is providing to this industry. The insurance industry has the opportunity to step out of its old skin as a complex and far-removed industry for customers, and form an exciting and personal relationship instead. It is time for us to celebrate the mutually beneficial friendship founded on technology which will ultimately deliver better value for customers, and result in fewer claims for the insurer.