Aviva is increasingly turning to the internet of things (IoT) to set its home insurance offering apart from the competition. Through a range of partnerships with UK-based IoT startups, the insurer is looking to keep home insurance customers engaged year-round, and hopefully cut down on claims in the process.
Aviva breaks home insurance down into the three main issues its customers are most concerned by: safety, security, and leak. "Where that plays in is the new generation of cameras, sensors, smoke detectors and leak detectors, which give us this new capability," said Nick Ayrdon, head of prevention and services at Aviva.
To harness these new capabilities, Aviva has taken the strategy of partnering with the best IoT startups in the UK rather than developing the technology itself. It has partnerships with home security camera company Canary, it holds a stake in Cocoon and is working with leak detection sensor LeakBot, developed by HomeServe Labs.
While leaks might not necessarily keep homeowners up at night, they certainly do insurers. Escape of water claims are the single biggest cost for home insurers, making up a quarter of all home claims paid out.
Aviva has been working with the LeakBot for over two years, allowing it to test the device in the field and gauge customer response. "The drivers for us aren't just claims, it is about helping our customers keep their lives on track," said Ayrdon.
In terms of home security, Aviva gave away 500 Canary smart home cameras in October 2015 to new home insurance customers. Ayrdon said this exercise allowed the insurer to "harness all of the insights from that experience" but that it has not yet "integrated it into our product".
Similarly, Cocoon is a UK-based smart home company which manufactures what it calls a "complete security system in a single device" and although Aviva hasn't piloted the product with customers yet it has invested in the startup through its ventures arm.
The insurance industry is becoming increasingly obsessed with the idea of customer engagement, bringing it in line with important everyday services like your bank account through digital channels. "Most of the year customers aren't using their insurance and aren't making claims very often," Ayrdon said. "So keeping us relevant is a big thing."
The eventual aim for Aviva is to take all of these partnerships across those three tenets of home insurance – safety, security and leak – and to bundle it together for customers, ideally with everything managed via the MyAviva mobile app. So in practice a new home insurance customer wouldn't just get a policy document but could buy a premium policy which sees them receive a smart home security camera and a LeakBot all at once.
"It makes sense to offer customers things that help them avoid bad things happening and whether they have adopted those themselves, or if we can offer it as a pack, that is something we are looking at," said Ayrdon.
British company HomeServe has recently pivoted into IoT by spinning out a Labs division and developing the LeakBot, its leak-detecting sensor for homeowners, when it saw that existing leak sensors weren't fit for purpose.
The 20-year-old company's core business has traditionally been home callouts for home insurance emergencies and repairs.
The LeakBot itself is a small device which can be clipped to any pipe by a homeowner to detect leaks on the mains water supply. It then alerts customers via their smartphone to issues such as dripping taps, hidden leaks on pipes and taps being left running.
The value proposition speaks for itself, according to Craig Foster, managing director at HomeServe Labs.
"It can be mailed to a homeowner in the post and takes five minutes to install it: clip it to a pipe and push a button which connects to the internet," Foster said. "So it is cheap enough for the insurer to provide that to a homeowner for free and claim it back in reduced claims, and it keeps customers sticky by making the insurance policy tangible."
Earlier this month HomeServe announced that it is also partnering with insurer RSA, distributing the LeakBot to customers via its More Th>n brand.
IoT in insurance: risks
There are risks though. IoT devices are particularly susceptible to hacking, there are privacy and data protection issues and more recently there has been evidence that smart metres and similar IoT devices can make mistakes or even be manipulated, ending up with increased customer charges, rather than the promised savings.
Ayrdon is aware of the risks and believes transparency is key, especially with data as sensitive as that generated by a smart camera in someone's home. This is why the security of a product is a primary concern when Aviva is assessing partners in the IoT space. "If we start offering packages and recommended solutions the security of those solutions will be paramount," he said.
Foster from HomeServe Labs sees the same concerns. He recognises the concerns with IoT devices being harnessed by hackers, but says the LeakBot doest't have this issue.
"We use a wide area Sigfox network, so no open port to the cloud," he said. "It's almost a cellular network, so we don't have those same hacking risks that you get when connecting to the internet."