Four Smart Home Trends Impacting the Insurance Industry

Today’s smart home marketplace is diverse. Devices and systems are proliferating across every pricing tier — from the $30 Amazon Echo device, to the $500 Google Nest system, to whole-home automation systems like Crestron and Control4. Hardware costs are declining, and putting IoT within the reach of the average homeowner.

Smart home brands continue to push into an ever-expanding range of verticals, from smart TVs, to intelligent wireless networks, to entire houses designed with responsive systems integrating their lighting, heating, and fire prevention hardware. Basic smart home devices are now available online, BestBuy and Home Depot, internet providers like Verizon and AT&T, and even (in the case of pre-designed smart homes) through realty firms like Coldwell Banker and Vivint.

In all these ways, this year will mark a distinct turning point in the industry, driven by the rapidly-expanding presence of voice systems like Amazon Alexa and Google Home in homeowners’ lives. Four key trends in have emerged, and will impact homeowners’ experiences with smart home technology throughout the coming year.

1. Proliferating devices are transforming smart homes from luxury to expectation.

As the number of manufacturers in the smart home space grows, the costs of hubs and accessory devices will continue to decline, giving homeowners gained access to a new world of options for fire detection, flood prevention, and home security.

Navigant Research discusses how competition in the market is making the smart home more accessible, and we’ve seen the progress of how Amazon Echo devices now cost $30 or less, as “one of the fastest-adopted technologies in U.S. history” according to Accenture.

Entry-level starter kits, in particular, have proliferated to a striking degree, with a full 90 percent of U.S. homes now boasting at least one smart home device. At the same time, a growing number of homebuilders and real estate agencies, such as Lennar and KB Home, are touting integrated Amazon and Google devices as key benefits of the homes they sell. Expanding adoption is creating the expectation for smart home technology in every home.

2. Technologies continue to diversify across a range of platforms and verticals.

With the flood of new data from these interconnected systems, smart home artificial intelligence (AI) algorithms are getting smarter every year, attracting more startups and proof-of-concepts (POCs) into the space. As the smart home saturates the mass market, hub-based systems remain more prevalent than hub-less ones, relying on either Wi-Fi or cellular signal.

As Amazon Alexa, Apple Home, Samsung SmartThings, Xfinity Home, and Google Assistant dominate the space, smaller middleware companies are beginning to make names for themselves: Wireless home automation provider eZLO, aims to serve as a complete ecosystem integrating all Z-Wave devices in a home. Yonomi provides an agnostic platform intended to support a broad range of devices, and platforms such as Muzzley, Notion and Plasmatic work wirelessly with components from a wide range of manufacturers.

This year also marks the entry of more open-source smart home platforms, such as openHAB  and Home Assistant, which offer the promise of greater flexibility for developers for greater innovation and greater security for homeowners.

3. Interconnected devices are driving an explosion of interoperability.

Increased integration and interoperability among devices and services is expanding. While Apple hubs only played nice with other Apple devices, and Samsung owners were safest purchasing only SmartThings components, interoperable technologies are giving the industry more open integration – which translates into more choice for homeowners.

For example, users can now seamlessly queue up their favorite Amazon Music playlists on Sonos and Samsung SmartThings speakers; Amazon Alexa, meanwhile, works quite a bit more smoothly with iPhones than it did just a year or two ago; and Google Assistant has demonstrated strong improvement in its ability to control SmartThings and HomeKit devices with fewer glitches.

This is an evolution from individual smart home devices to integrated multi-device routines, moving towards a near future of whole home automation. The industry is closer to that endpoint than at the start of 2018, whole-home smart homes will soon be within the financial reach of the vast majority of homeowners.

4. Hardware costs are dropping rapidly, and will continue to do so.

Prices of voice-activated devices – particularly Amazon Alexa and Google Home are becoming practically insignificant for homeowners. Amazon’s default entry-level starter kits, for example, now retail for only $30, and older versions regularly sell for $20 or less. All the while, multi-device networking and interoperability are becoming ever more robust and seamless.

Currently the market remains fragmented in terms of price, with brand name whole-home starter packages retailing for around $1,000 and custom whole home automation systems selling for $3,500 or more. But as the costs of hardware continue to drop, even these  systems will fall within the financial reach of the average homeowner, making fully integrated smart homes the “new normal” throughout the U.S.

Recognizing the significance of all these trends, many home insurance companies have begun making bolder marketing moves to owners of smart home devices. Some firms are now offering deductible guarantees for homes equipped with smart fire and leak prevention systems – while others offer lower deductibles for homes secured with wireless burglary prevention units.

These four trends in the home industry will start to be felt within the insurance industry as we move into 2019. Stay tuned for SmartInsure’s impact, coming soon!