Report: Usage-Based Insurance Can Be Applied to the Smart Home

The research firm Parks Associates suggests that insurance companies are ‘quickly emerging as a key player in multiple smart home ecosystems.’

DALLAS – Thirty-eight percent of broadband households in the United States have “very strong intentions” to buy a smart home device in 2016, according to a new report by research firm Parks Associates, based here.

The report, titled “IoT: Smart Home Business Models,” finds that 51% of broadband households in the U.S. consider an IoT device that alerts them to smoke and fire as highly appealing, and 41% said a device that alerts them to a water leak is also highly appealing.

In the report, Parks notes that these smart home use cases would benefit insurance companies in both saving costs and adding value to their customers.

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“The insurance industry is quickly emerging as a key player in multiple smart home ecosystems,” says Tom Kerber, director, research, home controls & energy, Parks Associates. “The advanced detection and alert capabilities in smart home devices give insurance companies new and innovative ways to avoid risks and reduce fire or water damage. State Farm and Liberty Mutual have both announced plans to offer incentives or discounts to customers to encourage adoption of smart home devices.”

The report outlines the IoT market, including trends, business models and partnership opportunities, and examines key alternative business model options for energy providers, smart home product manufacturers and service providers. According to Parks, the report shows how connectivity enables business model innovation and addresses how partnerships can create value and shift monetization from direct to indirect approaches while expanding markets.

“Discussions at our CONNECTIONS conference in May indicated that insurance companies are highly engaged in the smart home,” Kerber says. “Usage-based insurance, which began in the automotive market, can now be applied to the smart home. We expect to see a broad range of new monitoring devices for the home in the future.”

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