Over the last several years, “smart” gadgets have begun to permeate through every part of our lives. First it was our phones, then our books. More recently smart wearable devices have increased in popularity, which has led to smart watches and fitness trackers. Now, the next wave of smart devices has come, and it can best be described as “smart home” gadgets.
Frequently described as part of the “internet of things” (IoT), smart home gadgets range from internet-connected thermostats to refrigerators to light bulbs. One of the most popular categories for smart home devices? Home security. This includes smart locks, motion sensors, cameras, and smoke detectors, to name a few.
Many of the tech startups selling these products make claims that their internet connected devices will give you peace of mind, make your home safer, and lower your insurance premiums. While they may indeed give you some peace of mind and WiFi connectivity may add some convenience, insurance companies aren’t quite on board with the other two claims.
According to a recent article in the Wall Street Journal, “The $84.9 billion U.S. home-insurance industry is resisting widespread price reductions because insurers say little data exists to show the devices can improve security or prompt homeowners to be more active in securing their homes.”
In other words, home insurance providers have yet to see compelling data to convince them that smart gadgets are actually effective in providing any real security and from the insurance companies’ perspective, reducing the risk that the average homeowner will have to file a claim.
The WSJ spoke to one New Jersey resident who recently installed internet-connected security cameras, thermostats and lights in his four-bedroom home, only to find that his insurance company didn’t offer a reduction in his premium for any of those items. They did, however, offer a discount for his security-alarm system.
Insurance companies have long offered significant discounts for monitored central alarm systems. That’s because unlike internet connected gadgets, there is a significant and compelling body of data and research showing that alarm systems do reduce the risk of burglaries. This study from Dr. Simon Hakim at Temple University, for instance, found that a home with a central alarm system reduced the chance of burglary more than 66%.
According to investment research firm, Zacks, homeowners insurance companies offer discounts on average of up to 20% for homes with a centrally monitored system, with additional discounts of around 5% for things like fire alarms/smoke detectors.
Tech blog CNET recently pointed out another problem with many of these smart home devices. The security of the devices themselves. They write, “IoT startups, consumed with getting a company and a product off the ground, may not always give security its due.” We saw evidence of this first hand in October when hackers used internet connected devices that had not been set up or manufactured with proper security measures to temporarily take down Twitter, Netflix, Reddit, Spotify, and several other high profile services. Because these devices had been left vulnerable, they were infected with malware and utilized in a sophisticated DDoS attack.
The WSJ says that insurance companies need ten years of data before they can make a determination about a products effectiveness, so maybe someday we will know a bit more about what to really expect from smart home devices. For now, though, it’s clear where home insurance experts have placed their confidence.