Smart Home Devices Raise Issues with Privacy Concerns for Homeowners

A smart home device is a heating, lighting or other electronic device that can be controlled remotely by a phone, computer or tablet.

Insurance companies have been offering discounts to drivers who install monitoring devices in their cars for a number of years (think Progressive Snapshot) and now they are starting to offer discounts to homeowners who install smart home products like Nest Protect.

A smart home device is a heating, lighting or other electronic device that can be controlled remotely by a phone, computer or tablet. A few examples of smart home devices include smoke and carbon monoxide detectors, security cameras, and even a water valve device that monitors water temperature to prevent freezing pipes.

Recently, American Family Insurance, State Farm and Liberty Mutual have teamed up with automation companies such as Nest to provide discounts to customers who install certain home automation products. Customers using these products may qualify for a discount on their homeowners policy.

Industry insiders say it is only a matter of time before the majority of insurers offer discounts for smart home products that increase the security of a house while also monitoring for potential problems such as burglary, fire and even dangerous carbon monoxide levels.

However, security experts and consumer advocates warn that these products can be a double-edged sword. While they can make a home safer if properly installed and combined with the correct transparency protocols, if the proper protections are not put in place these devices could ultimately be a threat to a homeowners intimacy and privacy.

Experts say that state insurance regulators will keep a close eye on the industry as it develops and see if any unfair denial of claims arise due to the devices. Regulators would likely act on consumers concerns that present themselves as these devices end up in more and more homes.

It probably won’t be long before most homes have at least one smart device. According to projections by Acquity Group, a digital marketing company in San Francisco, California, roughly 69 percent of consumers will own a “smart” home device by 2019.

Young homeowners seem especially eager to adopt the new technology, as long as their premium drops. A recent survey done by Towers Watson found that nearly 90 percent of millennials were open to the idea of a “usage based insurance policy” in exchange for discounts on their policy. Only 74 percent of other age groups were open to the idea.

Here is a quick breakdown of what discounts are being offered by insurers:

American Family

American Family and Nest are offering their policyholders a free Nest Protect smoke and carbon monoxide detector along with a 5% discount on their insurance. Currently, this deal is only available to policyholders in the state of Minnesota.

Nest protect is a smoke and carbon monoxide detector that speaks to tell homeowners where and what the danger is, it also sends phone alerts and tests itself periodically to make sure that it is working properly.

The discount program is called Safety Rewards and according to American Family it does not involve sharing any of your personal data. Monthly reports that are sent to American Family do not include information about alarm events in your home.

Participants in the program must let American Family know the names of the rooms were Nest is installed as well as agree to both Nest’s legal and privacy policies and American Family’s terms and conditions.

According to a recent newspaper report American Family has signed up 6,285 policyholders for the Nest program and 48% of them have installed the Nest Protect device.

Liberty Mutual

Nest has also jumped into a partnership with Liberty Mutual in 10 states. Like American Family, Liberty Mutual is giving away the Nest Protect but only to customers who switch from other carriers.

According to their website, Liberty Mutual policyholders may qualify for a 20% discount off the fire portion of their premium if they sign up for new smart home discounts.

Data collected from the program will not be used to influence decisions regarding renewals, claims or policy cancellations.

State Farm

State Farm went with home monitoring company Canary for its partnership. State Farm policyholders get exclusive offers on Canary products, which could qualify them for discounts on homeowners and renters insurance.

Canary products let users see and hear what’s happening in their homes using a wide-angle HD camera that includes audio and motion detection along with temperature, humidity and air quality readings.

The program may not be available in all states. State Farm does not have access to any of the audio or video generated from Canary’s system.