According to The Boston Globe, Liberty Mutual and American Family Insurance have started offering discounted insurance premiums to US-based customers who install connected smoke and carbon monoxide detectors and agree to share data from these devices with the insurers. This development is just one illustration of how the smart home can be monetized beyond basic monthly fee or retail models, and shows how ecosystems that are more open, where third-party companies work together to the benefit of the whole, will stimulate greater smart home take-up.
Looking beyond professional home security
As discussed in previous opinion pieces and reports, many smart home service providers have focused initially on professional home security because it is a traditional market with customers that are willing to pay for the relatively high set-up costs and subsequent monthly fees. Although the market is limited in size, it can be expanded by providing less extensive, but cheaper and more flexible home security and monitoring services. There are some early signs of success of this approach, with companies such as Comcast, AT&T, Swisscom, and G4S claiming a growing level of consumer interest. In Ovum's view, overall growth in this market will remain steady.
However, the smart home concept is about more than home security. Other segments such as smart energy, health and well-being, and home automation all show great promise in terms of making our lives easier, safer, better, and more efficient, but with one catch – they are largely not something that consumers wish to pay for. Even devices such as smoke detectors, which save countless lives each year, have required heavy government investment to try to convince the public to install and then properly maintain them.
Making such devices connected (or smart), however, enables new business models to be created, such as with the Liberty Mutual and American Family Insurance example, that provide the consumer with a financial return on their investment, and even perhaps free technology in the first place. After weather-related incidents, fire and flooding damage are the biggest cost drivers for insurance companies, and therefore such companies are willing to invest in solutions that enable them to gain a better level of data on their customers in order to set their premiums. Reducing set-up costs and providing financial incentives will significantly increase the attractiveness of such solutions to mass-market consumers.
Insurance is just one example, but it shows that smart home use cases and business models around home safety, personal well-being, smart energy, etc. – although not as obvious and straightforward as professional home security – can be created with innovative thinking and design. Of course, a telco still needs to work out its role in such models. However, by creating more open platforms and working with partners to create innovative solutions that make customers' lives better, as well as make business sense, they will help stimulate far greater adoption of the smart home concept.
"Monetization remains the big issue in the smart home industry," TE0003-000858 (June 2015)
Smart Home: The Broadband Service Provider Opportunity, TE0003-000801 (November 2014)
Michael Philpott, Practice Leader, Consumer Services