Change, it is said, is the only constant. For many insurers, change can be a harbinger of new opportunities and new risks.
As we look to the future, changing technologies present home and car owners with new potential risks. Hacking and ransomware, once confined to computer networks, could become an endemic cyber vulnerability for our increasingly connected vehicles and “smart home” devices. New sources of energy can help reduce our dependence on dirty fuels, but could introduce new fire hazards into the home. Yet many of these same technologies could create new sources of data and new risk mitigation options for personal insurers, potentially providing them with new opportunities to help their clients manage these evolving risks.
Cars can stall. Cars can crash. And many of today’s cars can be hacked.
Modern vehicles are often computers on wheels, brimming with sophisticated electronics, sensors, processors and communication devices that enable all sorts of advanced features, proximity sensors that could potentially help you avoid that bender of wing to automated parallel parking (to help you avoid the embarrassment of trying to do it yourself). Much like our computers, “connected cars” can present multiple new vulnerabilities that hackers and criminals can exploit and insurers may now want to consider when underwriting.
Just as hackers lock down computer networks and steal data for ransom, connected vehicles could be held for ransom. Personal auto insurers may want to consider how to adapt coverage if vehicle ransomware becomes more prevalent.
The risk of vehicle ransomware can be minimal compared to the potential for a connected vehicle to be remotely hijacked and driven against a driver’s will.
While connected vehicles may bring new risk exposures, they also have the potential to accelerate the evolution of usage-based auto insurance. Already quite mature when COVID-19 hit, the growth of remote working has brought new consumer attention to driving behavior and insurance pricing. Many insurers may have the opportunity to continue to refine their telematics programs through, among other things, the use of sophisticated analytics on vehicle telemetry data to provide even more personalized insurance offers to customers and prospects.
Connected vehicles can also help streamline the claims process. As vehicles and roads integrate more sensors, they collect data that could potentially help adjusters determine the facts of a claim faster and with potentially more certainty than relying on statements or physical damage inspections.
A smarter home
Just as telematics has introduced potential new data sources for auto insurers and new insurance products for consumers, Internet of Things devices could do the same for homeowners insurers.
Small internet-connected devices like temperature, pressure and water sensors could alert a homeowner to problems before they lead to major losses. For policyholders who own rental properties that may be unoccupied for long periods of time, temperature sensors could provide an early warning that the heating system is malfunctioning and pipes are about to burst. Insurers can use the presence of these sensors to offer discounts or credits, much like some insurers offer discounts to homeowners if the insured installs a monitored security system.
The presence of smart home sensors can also provide new sources of underwriting data for insurers to analyze. New sources of data provide insurers with new opportunities to develop products to help their clients manage the ever-changing risks of homeownership.
What about piracy? It appears that smart home IoT devices may also be vulnerable. The scenario isn’t hard to imagine: you wake up shivering one winter morning, wondering why your house is freezing. You walk up to your smart home thermostat, but instead of the temperature you expect (a comfortable 68) you see a message that your heating system has been hacked and won’t unlock until you use it. a cryptocurrency. And just as connected car hacks can lead to catastrophic collisions if a hacker gets behind the wheel, smart home hacks can cause fires or even explosions in a home.
In the face of climate change, home and vehicle owners are adopting greener alternatives. Residential solar installations are skyrocketing as solar energy costs continue to fall. Understanding the nature of solar panel risk can be an important consideration for insurers. It has been reported that firefighters struggle to drill holes in roofs when battling a fire. Solar systems can occasionally cause house fires. Since solar panels are still new compared to traditional roofing, insurers may also want to consider the lifespan of the panels, as well as the associated replacement costs if these panels are damaged, in order to better inform their customers of the possible limits. the insurance they may need following a solar installation.
Electric vehicles (EVs) and their charging stations are also on the rise. Since EVs are also new compared to their combustion engine counterparts, insurers may also want to examine how EVs and their components handle crashes and physical damage, including concerns about fires. drums. Some of the emerging cyber risks associated with connected vehicles may also be present in electric vehicles. Home charging stations can also add new risk exposures. As insurers begin to understand the new risks associated with the adoption of alternative energy, they may consider offering new options to customers to incentivize the use of security boxes for charging stations or solar batteries to limit fire damage if a battery ignites.
Towards data-driven change
Insurance products tend to thrive where data is abundant (the law of large numbers and all that). As the nature of risks faced by auto and home owners continues to evolve with new technologies, the insurance industry has the opportunity to leverage many of the same technologies to help create new streams. of data that could inform product development and help their customers manage these dynamic risks.
We may not know everything we will learn as new sources of data emerge, but we can be quite confident that they will help bring change and opportunity to insurers and policyholders.