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IoT: How Does a Connected Home Affect Your Risk and Insurance?

May 18, 2018
News

If you have recently purchased a new “smart” device for your home, you have taken one step closer to having a connected home through the “internet of things”. The anticipated growth for IoT devices over the next year is astounding, quickly outpacing growth in any other connected device area, such as smart phones, wearables and tv’s.

With home hubs using connected technology through artificial intelligence such as Amazon Alexa and Google Assistant, all of our connected devices can be accessed quickly and easily while in home or through an app when we’re away from home.

Many appliance brands now connect to an app that let’s you manage them remotely.  Your oven can be turned on to preheat while you make your way home from work. Your dishwasher can notify you when a cycle is complete.  And of course a smart thermostat will allow you to monitor and adjust your home’s temperature, an especially nice feature when driving out to the lake on a hot summer’s night. 

Combine all this with a video doorbell, alarm system, smoke detectors, lighting systems, etc., and now more than ever before, it is easy to build your connected home.

What’s appealing about a connected home to us as consumers?

We know technology can improve our quality of life, giving us more time to do the things we like with the people we love.  The conveniences that connected devices can bring to us can help save time, help us organize and keep our homes safe.  As these devices and systems develop out, they will start to save us money on our insurance too.  Just as companies have offered discounts on insurance for installing a monitored alarm system, additional intel that can reduce risk is of great interest to insurance providers.  If a smart home can signal the way to reducing the cost of insurance, this can be a win for us as consumers as well as for the companies providing our coverage.

Why are insurance companies developing programs for smart homes?

Again it just makes sense that a more monitored home will reduce the risk of loss.  Imagine if your dishwasher can alert you that there is something wrong with the main seal and pump.  If you know this ahead of time, you can make the necessary repairs before it fails and causes damage to your flooring and cabinets. Reducing the chances of a break in with a video doorbell and lighting programmed to deter suspicious activity makes a smart home at lower risk of loss and hence should have discounted insurance premiums.  We’re not there yet, but this is what is being worked on in our industry.

What about the risk of a hack?

Just like your computer or laptop, a smart device can create avenues for cyber hackers. We all think of a hack being the theft and extortion or illegal use of our personal information.  But every connected device is connected to you and creates another pathway.  More now than ever, its important to think about personal cyber protection to cover against:

·         Cyber attacks – unauthorized access or malware damage to your computer or connected home device

·         Cyber extortion – threat to damage, disable or deny your access to your own data

·         Online fraud – identity theft, unauthorized use of banking or credit card information

·         Data breach – loss, theft or accidental release of others’ identity that is in your care, custody or control

What’s next?

Well if you’re anything like this writer, embracing technology to simplify our lives will be welcomed with open arms! Although there is risk associated with connected devices, the benefits far outweigh the risk and the risk can be insured against.  Imagine the day when items show up to replenish your refrigerator based on what had been scanned in and scanned out and on the menu you have uploaded to your app.  How will that change your shopping habits? How will it impact your grocery spend?  It seems that envisioning the future is a step by step process as we add more devices to the internet of things!

Personal cyber insurance coverage is available right now through some of the companies we represent.  Contact us if you would like more information.