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Can a smart home reduce your home insurance?

Can a connected or smart home save you money on home insurance? In 2015, said 45% of all insurers felt connected devices will be a significant driver of revenue growth within 3 years. It’s 2019 – where are the discounts?

The state of smart home and home insurance in Canada

The industry is in a stall pattern. Rob Carrick, money columnist with the Globe & Mail, is “mad as hell over home insurance” because, unlike car insurance, it’s unregulated so insurers can keep upping their rates without the need of government approval. “The cost of home insurance for our house has gone up 19 percent on a year-over-year basis,” Carrick says, and it’s not because he’s filed too many claims. It’s catastrophic events due to climate change that have led to an increasing number of expensive claims driving the price up for all of us.

“Insurers, help us out before you burn your reputations to the ground,” he continues. His suggestions for the industry – let us know about cheaper coverage options and give the people better tools to protect themselves.

Is a smart home not a great tool? A lot of other major countries seem to think so.

Smart Home home insurance around the world

In the US, State Farm and All State launched a money-saving program with Canary, a smart home camera system. American Family Insurance offered customers a discount if their customers installed the Ring Doorbell or Nest Thermostat. Liberty Mutual launched a program with a smart home monitoring service, Vivint, who offer smart locks, doorbell cameras, and 24×7 video recording.  Liberty Mutual also has a 5% premium reduction if you install an August smart lock.

AXA Insurance in France offers a 10% discount with a working intruder alarm and a 5% discount with a smart lock.

Why should a smart home reduce your insurance?

It’s all about mitigating risk. If you reduce the chances of something going wrong, you’re reducing the chances of submitting a claim. If the theory holds true, you should pay less for insurance.

A smart lock can give you notifications when someone enters your home. You can grant one-time access to visitors and not just leave a key under the mat (smart thieves know where to look).

A camera doorbell not only monitors who is at your door, and whether or not you want to let them in, but can deter package thieves.

Outdoor cameras can deter thieves from stealing your bike, or any other valuables you might keep outside the house, thus reducing the chance you’d submit that claim.

A connected fire or smoke alarm can notify you of a fire, even if you’re away from your home, allowing you to take immediate action either with a neighbour or police.

There are two types of flood sensors: One that can detect a leak, the other can attach itself to your main water shut off valve so if you spring a leak, you can turn off the water supply remotely.

This past year water damage from floods due to sewer back up or overland water surpassed fire as the number one insurance claim in Canada, both in the number of claims and the associated costs. The average cost to repair a finished flooded basement is $43,000. A smart home should reduce your home insurance quotes because you’ll make fewer claims with the assistance of these connected devices.

Smart home and home insurance in Canada

Home insurers in Canada are not adapting, at least, not yet. Intact insurance has written about the benefits of a smart home, but no mention of insurance discounts.

I called several different providers to ask if a smart home could reduce my insurance. Desjardins is the only one I found that supported a connected home in any way, but it doesn’t necessarily mean you’ll pay any less. If you sign up with them, they’ll give you (1) $36 Rooster flood sensor for free. You can download the Desjardins Alert app, connect with your Rooster, and it’ll notify you if you spring a leak from your dishwasher. Kudos to them for taking the first step.

But, if there’s a chance of a leak from your bathtub, washing machine, sump pump, sewer back up, eavestroughs, winter thaw, bathroom sink, kitchen sink, hot water tank, fridge or freezer, or even lousy caulking around a window, you’ll need more sensors, which you can buy from them. It doesn’t mean it’ll reduce your premiums, though.

I spoke with a broker who told me there were no discounts, but we could see a reduction in our premiums every year. The smart home wouldn’t reduce our home insurance. You’d see a reduction in your premiums because you’re not submitting a claim.

But wait, Smarter cars equals cheaper insurance

In Canada, you can see a 25% reduction on your auto insurance quotes with several providers. Desjardins has its Ajusto App, TD has My Advantage, CAA, Pembridge, and Co-operators all offer telematics discounts.

If you’re unaware, telematics uses your phone, or third-party connected device, to measure your speed, distance, the smoothness of your drive (acceleration, braking, turning), and the time of day when you drive to give you a driving score. If you score 60% or higher, you see a reduction in your premiums. Some argue against telematics saying it’s an invasion of privacy.

Insurers argue they get a better idea of who you are as a driver, rather than basing your driving activity on historical data and assumptions. They can give you a more accurate rating from studying your driving behaviours.

NOTE: Currently, telematics only affects Nova Scotia, New Brunswick, Quebec, Alberta, and Ontario car insurance quotes.

How a smart home does lower your home insurance

A monitored alarm system will net you a 5% savings on your home insurance premium. If you have a localized camera, that records video and sends you personal notifications of movement, that doesn’t count. Installing a full alarm system in your house, where a third party monitors your home for intruders can save you money, but the monthly fees associated with monitoring are around $30 – is it worth it to save ~$5 or $10 on your home insurance?

Should you invest in a smart home reduce your home insurance costs in the future

When asked if a smart home offered any insurance discounts, every insurer and broker replied with, “that’s a good question,” some even put me on hold to ask a higher up. A smart home is a great idea, but hard to implement on the insurance side. It’s still a relatively new technology without wide-scale adoption, making it hard to quantify results post-implementation.  A few companies said we should see something “soon.”

Even if it doesn’t lower your insurance premium, a safer home, one where you don’t have to worry about intruders or deal with contractors to repair the damage after a flood, is a smart home.