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How some insurers are covering smart homes

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How some insurers are covering smart homes

While the idea of a "smart home" is still relatively new, a number of insurers have begun offering discounts to encourage policyholders to use smart home technology.

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An emblem of the so-called internet of things movement, a smart home is one in which the user is able to monitor the house and control aspects of it remotely using a smart phone or other internet-connected device. These are also sometimes referred to as "connected homes." For this analysis, S&P Global Market Intelligence limited its search to the term "smart home" in rate filings.

American Family Insurance Group has embraced this technology. In early December 2016, regulators approved a rate filing from unit American Standard Insurance Co. of Ohio that described a "Proactive Home Protection Discount." This discount kicks in when the policyholder has some kind of device that helps to either detect or mitigate fire, theft and water risks. Per the filing, the smart home device must be able to send alerts to the insured on his or her mobile device via an email, a text notification or a "dedicated application."

A filing from LM Insurance Corp., which is a unit of Liberty Mutual Holding Co. Inc., provides descriptions of these different technologies. The theft protection device involves an alarm that can be either unmonitored, self-monitored or professionally monitored. Professionally monitored systems alert both the customer and a security company or police department. In addition, the technology can be verified or unverified. Verified systems exchange data with a technology partner to make sure the system is working correctly.

LM Insurance describes fire protection devices in essentially the same manner as theft detection devices, with fire risk in place of theft. But the insurer provides additional detail for water protection devices, which alert the user to leaks in the home. The LM Insurance filing lists different categories based on whether the device detects water at a single point or whether it covers the whole dwelling. The filing also has a category for devices that can automatically shut off a water valve.

Milbank Insurance Co., a unit of State Auto Insurance Cos., discusses other technologies in a filing. In addition to smoke alarms and water leakage detectors, Milbank offers a credit for smart cameras, smart lights, automatic temperature detection technology and devices that can detect gas leaks. This information is contained in a filing submitted to Illinois regulators in late October 2016.

In terms of the quantitative impact for policyholders, a filing made by American Strategic Insurance Corp. yields some clues. For instance, water leak sensors offer a 4% discount to the homeowner on its "other perils" premium, while a water leak sensor with automatic shutoff provides a 6% discount. An 8% discount is available if the homeowner has a sensor attached to a water meter that detects water flow through the plumbing system and automatically shuts off the water main if it becomes excessive.

Like others, American Strategic mentions discounts for smoke alarms and theft detection devices in the filing. Further, the insurer offers an additional 1% discount if the homeowner agrees to share the data that the device collects with a smart home device partner. The filing from American Strategic, which is a unit of Progressive Corp., is pending and therefore not included in the above chart.

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S&P Global Market Intelligence offers a variety of tools to analyze the rate and product filings of insurance companies.

Click here for a template providing rate changes for a selected entity, state or type of insurance over a selected time period using interpretive charts and histograms. With this template, one can also view information on each filing along with key metrics related to premiums, approval time and affected policyholders.

Click here for a webinar with information on the resources S&P Global Market Intelligence has available regarding rate filings.