Smart Thinking

Informed consumers who adopt always-on technology and find new ways to stay connected to home are not only living smarter, they are eliminating risk.

2013 – a year of floods, fires and ice storms – changed the course of the Canadian insurance industry in more ways than one. Environment Canada reports that extreme weather events that used to happen every 40 years are now expected to take place every six years. Canadian insurance claims caused by home damage from severe weather now account for more than half of property insurance claims.

The unpredictable climate and damaging weather events is encouraging some property and casualty insurers to look for new ways to make insurance more affordable for Canadians.

HOME SECURITY BECOMES HOME AUTOMATION

Now, more than ever, technology is pervasive in our daily lives. Advances in devices and networks, combined with the rise of social networking, have changed the way people communicate with one another.

As technology evolves, so does related security. The home security business is among those that has had to adapt to the rapid advances in technology. More than 150 years ago, the first patent on electromagnetic burglar alarms was issued to Augustus Pope, who applied then-revolutionary discoveries about electricity to create a ground-breaking security device.

Today, the face of home security is changing again. But this time, the change revolves around connected consumer electronics and wireless devices.

Canadians have become increasingly connected; rates of smartphone usage and data consumption have never been higher. This evolution has led to traditional, hard-wired alarms being replaced by fully integrated, wirelessly connected and low-cost systems known as home automation or home monitoring systems.

Not only are these new systems more portable, flexible and easier to install, they are changing the size and scope of the home security market.

Home automation, now an extension of home security, is comprised of technology and solutions that automate and manage devices and appliances located within residential dwellings and small businesses. These in-home devices can then be controlled through a smartphone, tablet or computer.

Rogers is among those providing a smart home monitoring solution. Certified by Underwriters Laboratories (UL), it uses constant broadband and wireless connections. Users get real-time updates on activity in their homes via e-mail or text on activity, and can remotely control the system – such as automating thermostats, turning off water, randomly turning off and on lights and appliances when away from the home, and viewing real-time video feeds of specific rooms – through a smartphone, tablet or computer.

Smart door locks also allow users to remotely disarm their security system and unlock the door for, among others, repair people, cleaning services and babysitters. Should the system detect a leaking pipe, a door left open too long or a door left unlocked, it sends a message to notify the homeowner.

HOME AUTOMATION POISED FOR GROWTH

The home automation industry is projected to grow – predominantly within North America – to US$14.1 billion in worldwide revenues by 2018, note figures from ABI Research. This would mean an 11.5% increase over 2014. And globally, IMS Research reports that the market is expected to more than quadruple in the next five years.

Home automation is moving into the mainstream, with numerous companies entering the market. Among the factors driving new entrants are Internet connectivity rates in the home that are nearing full penetration, and wireless networks that are delivering faster and more reliable speeds.

As connectivity options make devices and systems more accessible, the growth of smartphones, cloud-based interfaces and broadband cable are making home automation systems dramatically more affordable. Traditional large, up-front installation costs and equipment purchases are being replaced by systems that leverage existing technology in the home and require minimal additional hardware.

MITIGATING RISK, REDUCING CLAIMS

Statistics Canada reported about 200,000 break and enter violations and more than 1 million property crime violations in 2012. Break-ins cost Canadian insurance companies millions of dollars each year in claim payments.

New home automation and security systems provide insurers with an opportunity to differentiate their offering and reduce costs. Many insurers offer discounts of at least 5% if a client’s home is equipped with a smoke detector or a traditional home alarm system.

However, a company could lower a premium by 15% to 25% if it installs a system that combines the two, as well as notifies the police, fire department or central monitoring station.

An all-in-one system that manages water leak notifications, carbon monoxide detection and security can help homeowners better manage risk, which could help reduce the number of claims filed and reduce insurance premiums.

A report issued last summer by J.D. Power indicates that overall customer satisfaction levels with Canadian home insurance companies decreased from 769 to 761 (on a 1,000-point scale) since 2012. This decline is largely caused by insurance price increases and a lack of awareness by customers about how to mitigate additional expenses.

ENHANCING INDUSTRY PARTNERSHIPS

Today, many insurers are testing new product lines, exploring additional target markets and considering expansion of distribution channels to reach a wider base of prospects. They are also contemplating opportunities for new partnerships.

Take, for example, Allstate Canada, which currently offers homeowners a discount of 25% on their premiums if they sign up for the Rogers product (in available markets).

“A well-protected home is one of the best ways to save customers from unnecessary stress, inconvenience and increased costs in the long term,” says Ryan Michel, vice president and chief risk officer for Allstate Insurance Company of Canada. “We are partnering with Rogers to offer our customers a reliable, UL-certified home automation system that can help create a protected, connected life in the areas that matter most to them – their families, homes, health and businesses,” Michel adds.