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The Connected
Home
New Opportunities
for Property & Casualty
Insurers
By 2016, the global connected home
market is expected to reach $235 billion,
with the largest revenue-generating
segments including home security ($110
billion), smart utilities ($33 billion) and
home entertainment ($68 billion).1
While this market is already large, it is in
its early stages of growth. For example,
the market for smart locks—which use
smartphones as a key, enabling electronic
monitoring of who goes in or out of a
house as well as electronic “forwarding”
of access—is just $261 million today but is
expected to grow to $ billion by
And connectivity is popping up everywhere,
from smart refrigerators that can monitor
food consumption to smart carpets that can
provide notification of unauthorized entry.
The Wall Street Journal cited three
factors—the popularity of the smartphone,
which can serve as a control center
for connected devices; the increasing
affordability of broadband and cloud
services; and the growing maturity of the
Internet of Things, with new chips and
standards allowing devices to talk to each
other—as major contributors to the rapid
growth of connected home
For insurers, the IoT can provide value in
the form of new insurance models and
products—based on deeper insight into
the customer’s needs—and a higher level
of customer satisfaction derived from
dynamic risk monitoring and improved
claims handling. The IoT also creates
opportunities for insurers to lower costs
and improve operational efficiency.
The property and casualty insurance
business has already explored the benefits
of connectivity in the auto insurance sector,
using wireless devices in vehicles to monitor
driver behaviors including distance travelled,
time spent driving, acceleration, braking and
turns. Through such devices, insurers can
do a better job of assessing and pricing risk.
The same is true for the connected home.
Insurers can leverage data from connected
home devices to assess and mitigate risk,
increase pricing sophistication, and offer
new products, all of which help drive
operational efficiency and top-line growth.
The Internet of Things (IoT)—the network of intelligent
machines and devices which can sense and interact with
each other over the Internet—has, quite literally, hit home.
Devices that automate, monitor and control individual
homes are proliferating. These include a wide range
of sensors, switches, web cams and thermostats, turning
homes into digitized environments, known generally
as “connected homes.” In many homes, wireless control
panels already enable a range of functions—including HVAC,
lighting and security—and can be managed from inside
or outside the home.
2
About the Authors
Cindy De Armond is a managing director
in Accenture’s Property and Casualty
practice, and leads the Policy Business
Service in North America. Contact her at
@.
“The connected home provides vast
quantities of data, helping transform
insurers’ underwriting and risk
avoidance models and creating
numerous new revenue opportunities
for carriers able to offer real value
to the customer.”
John V. Mulhall is a managing director
in Accenture’s Insurance Strategy practice,
and leads the Product and Underwriting
Strategy practice globally. Contact him
at @.
“The property and casualty insurers that
get the right connected home offerings
to market will establish an important
competitive advantage in the Personal
Lines market.”
Paul Lalancette is a managing director
in Accenture’s Digital IoT Business
Group and serves as global connected
home practice lead. Contact him at
@.
“The connected home is a rapidly
accelerating global phenomenon
and it’s essential to learn and
understand how market participants
are entering across a complex
ecosystem.”
3
4
The Connected Home—
A Complex Ecosystem
Figure 1. The connected home ecosystem
Insurers seeking to deliver value in the
connected home market are confronting
a complex ecosystem with multiple
participants, including utility companies,
home security providers, telecoms companies,
and Internet giants such as Google, all
seeking to establish positions (Figure 1).
The key to success is in finding the right
market entry point as well as the right value
proposition for customers. Insurers to date
have started exploring customer benefits
related to peace of mind and connected
control (through digital applications),
home security solutions—either under
a white label product, or in partnership
with a home security provider—as well
as opportunities in the eHealth and
connected car space.
The connected home represents a significant
opportunity for insurers in a number of areas,
including:
• Better risk management and risk
mitigation, through claims avoidance
and better claims handling;
• Better underwriting, based on increased
data flows and a keener understanding
of risk factors and behavioral elements;
• New product offerings, including value-
added services delivered in partnership
with other providers; and
• Closer customer relationships,
as a result of more frequent and
personalized interactions.
Other potential benefits include creation of a
stronger supply chain, with a better ability for
insurers to offer discounts to customers
(based in part on a better understanding and
capture of home contents) and connections
to a reliable replacement and repair network.
Achieving these improvements, however, will
not be easy. Connected home technology is
evolving rapidly, as are marketplace dynamics.
Insurers that ultimately gain a competitive
advantage through offerings related to the
connected home will need to do more than
find the right partners, however. These insurers
will also need to tackle challenges presented
by large inflows of new data; by customer
indifference to or lack of understanding of
new offerings; by regulatory and privacy
concerns; and by the “need for speed” in
getting new and desirable products to market
quickly and efficiently. These challenges will
largely be dictated by the strategies carriers
choose to enter the connected home market.
Peace of Mind
& Control
Media
Connected
Car
Energy
Efficiency
Consumer Electronics
Insurers
Digital Providers
Telcos
Insurers
Security Providers
Telcos
Digital Providers
Utilities
Digital Providers Retailers
Telcos Insurers
Digital Providers
5
Insurers
Medical Technology
Healthcare/ Fitness
Security
eHealth
Carriers are still in the early stages of
exploring the connected home market and,
in most cases, need to decide what strategy
to take and where and how to enter this
market. They may consider partnering with
companies that already have applicable
technologies, or coming to market with
their own version of technology under
a white label.
Take the case of a fairly basic connected
home offering: safety and security. New
wireless and machine-to-machine (M2M)
capabilities allow for remote monitoring
of the home and remote activation
of home alarm systems, locks, indoor/
outdoor lighting, smoke alarms, water leak
detection devices and even doorbells.
At the entry level, the property and casualty
insurer can partner with the security
provider by offering policy discounts
to customers who install and maintain
such systems, or by offering discounts
on the system installation itself.
At a more sophisticated level, the insurer—
either in partnership with a security provider,
or on its own initiative—can offer a data
recorder that can be installed in the home
to track temperature, humidity, wind speed
and mechanical vibrations as they affect the
house. At least one insurer has already filed
a patent for such a home sensor system.
The customer can benefit, not only from
lowered premiums resulting from better risk
monitoring and quicker action in case of an
adverse event, but from increased security
and peace of mind. The insurer, in turn, gains
a better ability to price the policy and an
opportunity to mitigate risk and reduce claims
losses. With the average claim for
a residential fire at more than $35,000,
the opportunity for claims reduction can
be significant.
Within the connected home environment,
property and casualty insurers can explore
many ways to avoid and/or limit losses
including:
• Using connections to in-home video
cameras to perform digital inventories
of the home’s contents, expediting
claims filings and making it easier
to remediate losses.
• Continuous monitoring through
connected smoke alarm detectors
and water leakage devices
to enable quicker response.
• Working through utility companies,
analyzing energy consumption data
and usage activity patterns to
increase the sophistication of pricing
liability and/or dwelling coverage.
• Encouraging beneficial customer behavior
pattern changes (such as locking the door,
engaging the alarm, turning off the stove)
through monitoring of in-home sensors.
• Increasing the effectiveness of fire
monitoring and response systems.
• Automated inspection as part of
regular preventive maintenance.
• Identifying causes of loss, particularly as
they pertain to wind and/or flood damage.
The Connected Home
Value Proposition for Insurers
The customer can benefit,
not only from lowered
premiums resulting from
better risk monitoring
and quicker action in case
of an adverse event, but
from increased security
and peace of mind.
6
7
While there is significant value
potential for insurers in the
connected home concept, there
is also considerable value outside
insurance product and pricing
innovation. Insurers seeking to
build customer relationships and
establish a lasting competitive
advantage through differentiation
should also be thinking about
new service offerings.
These might include:
• Home content monitoring and replacement.
Automated devices can track the age,
maintenance records and general condition
of major appliances and systems such as
HVAC. Customers can receive automated
reminders and/or recommendations on
maintenance, along with suggestions
on replacement purchases.
• Weather notifications. Customers can
receive notifications and updates
on severe weather conditions via their
preferred channel. In addition, they
can be given the option to have certain
valuable items (such as cars) protected
or placed in storage during high-risk
events. Insurers themselves can make bulk
purchases of replacement items ranging
from carpeting to televisions to help
customers deal with replacement issues
in the aftermath of major catastrophes.
• Health monitoring. Through wearable
devices, motion detectors and other
innovations, insurers can monitor
physiological statistics and offer
recommendations related to lifestyle
improvement, safety and behavior changes.
• Concierge services. Insurers can offer
new concierge-type services in areas
ranging from scheduling appointments
to booking entertainment events.
Expanding Beyond Insurance
Within the connected home,
insurers are focused primarily on
eight different product areas, each
with its own potential for improving
underwriting precision and limiting
losses while strengthening customer
relationships:
• Security—Increasingly sophisticated
alarm systems not only detect intrusions
and call contact centers or law
enforcement authorities; they can trigger
photographs or video footage (which may
be viewed remotely by customers on their
smart phones, allowing them to determine
whether there is real cause for alarm) and
enhancing the likelihood of apprehension
and loss recovery.
• Energy Management—New systems
controlling individual homes can reduce
utilities’ aggregate peak load requirements
and can help customers reduce their
own energy costs by automatically
managing demand to take advantage
of peak load pricing.
• Lighting—Lighting can not only be
controlled from outside the house, it can
also be set through apps to manage home
and travel schedules.
• Water—Alarms can now contact
homeowners about water leaks from tanks
or appliances, and can shut off the water
supply if necessary.
• Thermostats—Smart thermostats have
moved beyond mere programming;
they can now track residents’ activities
and routines and control temperatures
in response.
• Weather—Sensors now track temperature,
wind speed, humidity and vibration.
• Appliances—Refrigerators can alert
homeowners to power outages, while
washers and dryers can start or stop
automatically and send notifications
if problems arise.
• Smoke and Fire—New detectors not
only distinguish steam from smoke but
have the ability to shut off stoves and
other appliances that may be causing
the problem.
The Connected Home Universe
8
Considerations for the Future
Many major carriers are exploring the
connected home concept and determining
where and how to invest. Some of the major
areas for consideration include:
Data
Insurers need to think about which data
points are of most value and which have the
highest predictive potential. They should
be planning how this data will be obtained,
organized, stored and accessed, and whether
the current organizational capabilities are
up to the task of leveraging these new data
sources. Another concern is whether this
new data will overwhelm existing business
intelligence solutions and if new analytics
will be required.
Data governance and ownership are often
points of contention, as are the analysis and
modeling of the data. The IT team and the
operators of the insurance business have to
determine whether new tools and methods
will be needed.
The application of new data to claims
processes and the integration of raw data into
core policy and claims systems are other key
areas for attention. In some cases, business
and/or operating model changes may be
needed to support the new inflows of data.
Product Integration
Once data issues are addressed, insurers
need to consider their connected home
product strategy. Insurers can simply roll
out connected home offerings as a distinct
service from the product coverage, as a
way to improve customer experience and
intimacy. As carriers gain more insights into
the risks from the connected home data, they
can integrate the connected home product
into the pricing and coverages they provide,
particularly for higher risk segments of the
market. The insurers that have the best data
from connected home offerings will have a
significant first mover advantage to reaching
true product integration.
Security and Privacy
Insurers must first measure customers’
willingness to disclose personal data as
provided by sensors, video cameras, motion
detectors and other devices. With data
collected from multiple sources, insurers need
to determine whether current safeguards
are sufficient to protect customers’ privacy.
Audio and video capture capabilities pose
specific privacy concerns.
That said, Accenture’s own research shows
that most customers would be willing to
share personal information with their insurer
in return for benefits such as lower premiums
or quicker claims Our global
survey of insurance customers found that
78 percent of respondents would be willing
to share such information. Among home
insurance customers surveyed:
• 59 percent would share energy
consumption information;
• 55 percent would share smoke or carbon
monoxide detector information;
• 32 to 38 percent would share light-sensor
information; security video camera
footage; motion detector information;
and thermostat/humidity monitoring
information.
Of course, while customers’ willingness
to share information may seem like good
news to property and casualty insurers,
the insurers must be able to provide value
in return. If insurers promise improved
service, they should be able to deliver faster
settlement and greater transparency, while
using channels that customers prefer, such as
mobile and social media.
Loss Mitigation
As the use of in-home systems and devices
becomes more widespread, insurers should set
optimal targets for reductions in the number
and size of losses. The new data delivered by
such systems and devices will not translate
automatically into specific, targeted loss
mitigation programs. One possibility is to
explore how to leverage current commercial
lines loss mitigation programs as connected
home data makes it more practical and
efficient to offer lower-premium (and lower-
exposure) homeowner
Getting Insurers
into the Game
One approach for home insurers
to attract and retain customers
interested in the benefits of the
connected home is to offer their
own connected home products.
Accenture, for example, has developed
a connected home platform that
insurers can offer on a white label
basis under their own brand.
The platform connects the devices
of most relevance to homeowners
and insurers, including cameras,
window and door sensors,
motion detectors, thermostats,
sirens, and smoke and CO detectors.
Unlike other commercially available
products, however, the Accenture
platform is designed to be integrated
into the insurer’s CRM systems to
monitor usage and trigger discounts
as appropriate. It also incorporates
loyalty, couponing and other
monetization features.
of customers would be
willing to share personal
information with their
insurer in return for benefits
such as lower premiums or
quicker claims settlement.
78%
9
Taking the Next Steps
Insurers contemplating a move into the
connected home market—or an expansion of
current initiatives—have to think on multiple
planes at once. They need to define, for
instance, how customers currently engage
with their products and services; to track how
innovators in the connected home market
are enhancing the customer experience; and
to analyze the regulatory implications of
collecting and using vast quantities of data
from new sources.
The path to success usually involves five key
steps (Figure 2).
1. Envision and Define. The insurer should
start with a vision of where it wants
to be in the connected home value
chain. Does it want to focus upon
providing discounts in return for
information? Or does it see more value
in providing actual devices and services
to the customer?
The key to this step is in determining
what problem the carrier wants
to solve, be it market differentiation,
building the brand or reducing operating
expenses. By starting with the end
in mind, the insurer can identify the
appropriate path forward. It may,
for example, conduct an in-depth
assessment of loss performance
to see which types of losses may
be avoidable with new technology.
2. Establish. Whether in partnership with
others or through home-grown innovation
labs, the insurer should experiment
with concepts and technologies—including
analytics and modeling as well as the
actual in-home devices themselves—
to test the value proposition of the
chosen approach.
Using the information gained during
the Envision and Define phase, insurers
can identify the technologies and/or
devices that are most relevant to their
stated objective. This may require
extensive research into the data
produced by each device. Brainstorming
and use case creation can be employed
to map out practical applications for
connected home technology within
the insurance sphere.
3. Partner. An initial ecosystem of partners
will be needed to deliver the chosen
approach. The technical reliability of
devices is a major concern, but so is
the network of incentives that makes
the partnership work.
In particular, insurers should assess the
connected home ecosystem and determine
where they are best positioned in light of
their selected strategy. Should they
partner with a connected home device
maker to sell a white label product
branded by the insurer? Or are they
better suited to acquire a connected
home startup company and help it grow
and succeed? A traditional partnership
with a mature home security or
automation company may be sufficient
to provide insights into the market
opportunity, but the insurer should
retain a high degree of flexibility and
be ready to act quickly as other options
present themselves.
4. Pilot. The insurer needs to test the
mechanisms for adding value,
whether through the triggering of
discounts, the reduction of losses
through active monitoring and
alerts, or the expansion of existing
customer relationships. Rapidly executed
pilot programs can help assess the
impact of the new program on
marketing and distribution,
product manufacturing, underwriting,
policy and contract management,
and claims management.
5. Refine and Extend. As new pilots and
projects are developed, the insurers can
extend pilot lessons into new projects
while incorporating new technologies as
they emerge.
Start with a vision of how to enter the connected home value chain,
by determining what problem needs to be solvedEnvision and
Define
Experiment with concepts and technologies to test the value proposition
of the chosen approach
Establish
Assess the connected home ecosystem to determine which partnerships
to pursue
Partner
Test the approach through a pilot program and evaluate the impact
the new program has on other areas of the company
Pilot
Extend pilot lessons into new projects and consider new technologies
as they emergeRefine and
Extend
Figure 2. Five key steps in setting a connected home strategy
10
11
Conclusion
The connected home represents
an enormous opportunity for
insurers. To convert that opportunity
into profitable growth, however,
property and casualty insurers
should invest carefully in concepts
and partnerships that provide real
value for customers while offering
real potential gains for themselves
and their partner organizations.
Establishing the right approach
will require both rigorous research
and careful self-analysis on the
insurer’s part.
Copyright © 2015 Accenture.
All Rights Reserved.
This document is produced by consultants
at Accenture as general guidance. It is not
intended to provide specific advice on your
circumstances. If you require advice or further
details on any matters referred to, please
contact your Accenture representative.
Accenture is a global management consulting,
technology services and outsourcing company,
with more than 319,000 people serving
clients in more than 120 countries. Combining
unparalleled experience, comprehensive
capabilities across all industries and business
functions, and extensive research on the
world’s most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses and
governments. The company generated net
revenues of US$ billion for the fiscal
year ended Aug. 31, 2014. Its home page
is .
Accenture Digital, comprised of Accenture
Analytics, Accenture Interactive and
Accenture Mobility, offers a comprehensive
portfolio of business and technology services
across digital marketing, mobility and
analytics. From developing digital strategies
to implementing digital technologies and
running digital processes on their behalf,
Accenture Digital helps clients leverage
connected and mobile devices; extract
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enrich end-customer experiences and
interactions, delivering tangible results
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Learn more about Accenture Digital at
1 “The Role of Mobile in the Home
of the Future,” Vision of Smart Home
Report, published by GSMA, September
2011.
connectedliving/wp-content/uploads
/2012/03/vision20of20smart20home
2 Wolf, Michael, “Here Come the
Bluetooth Smart Locks: August
& Danalock To Help Fuel $ Billion
Market”, , October 14,
2012.
sites/michaelwolf/2014/10/14/
here-come-the-bluetooth-smart-
locks-august-danalock-to-help-
fuel-3-6-billion-market/
3 Mizroch, Amir, “In the Battle for
the Connected Home, Stakeholders
are Lining Up,” , August 14,
2015.
2014/08/15/in-the-battle-
for-the-connected-home-
stakeholders-are-lining-up/
4 Accenture 2013 Consumer-Driven
Innovation Survey
5 Accenture 2014 Claims Customer Survey.
insight-insurance-claims-customer-
About Accenture Footnotes
