Digital disruption has made its way into the home as seen through technology startups like Nest. These innovative solutions provide convenience, security and energy savings not only to consumers but also to organizations such as insurers. Using the internet and leveraging big data, Nest is developing an entirely new business model that creates value for both consumers and insurers.<\/p>\n
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In-home devices such as thermostats and fire alarms have been around for decades. It is not until recent years, however, that these devices have been able to leverage the internet and facilitate meaningful data aggregation to become a holistic platform. Nest is a provider of connected hardware for the home that builds sensor-based devices for monitoring temperature, smoke and carbon monoxide levels. Nest currently has three core products: Nest Thermostat, Nest Protect (smoke and carbon monoxide alarm), and Nest Aware (cloud video recording device). Unlike prior solutions, the Nest system can proactively monitor energy usage and remotely run tests or shut off utilities to prevent harmful events. The benefit for consumers is more obvious; a homeowner can operate and oversee their entire home remotely, efficiently and even be notified when abnormal behavior requires their attention.<\/p>\n
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The original value proposition of Nest was energy conservation, which has become a significant issue for both utilities companies and consumers. Utilities companies are aggressively trying to reduce energy consumption in homes by managing the supply of energy. Using Nest\u2019s system, homeowners can reduce their future usage 10-12%, or, $131-$145 estimated savings per home per year [1]. After successfully saving billions of kWh\u2019s of energy in the US, Nest\u2019s value proposition evolved into overall risk mitigation and the company continued to rollout additional connected devices including smoke alarms and in-home cameras.<\/p>\n
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Insurance companies quickly saw tangible value in these risk mitigating devices and knocked on Nest\u2019s door. Currently, insurance companies are spending billions on claims and actively seeking solutions to mitigate these problems. Nest recently announced partnerships with two of the largest American insurance companies, American Family Inc. and Liberty Mutual, through which Nest provides further savings to its users [2]. With that, a company that was originally labeled a consumer \u201ctech toy\u201d became a bonafide catalyst to change in the B2B insurance industry.<\/p>\n
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For the first time, Nest can be provided to consumers for little to no cost and receive a discount of up to 5% on their insurance premiums [3]. These savings are ultimately passed from the insurers to the customers. Because the consumer provides insurance companies with the in-home data gathered by the Nest devices, insurers typically give the device to consumers at no cost.\u00a0 This partnership isn\u2019t just a new revenue stream for Nest, it\u2019s also a new marketing and distribution opportunity. By the insurance providers having access, they can proactively prevent fires and burglaries from occurring, drastically reducing insurance payout costs [4].<\/p>\n
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Any disruptive innovation has its critics. Despite the many risk management benefits that Nest brings to the home, consumers are becoming increasingly concerned about their privacy. Nest collects a massive amount of proprietary data from their thermostats and other in-home devices, which is ultimately flowing to the Google cloud (Nest was acquired by Google in 2014) [5]. \u00a0Consumers associate Nest with the tech behemoth\u2019s parent company and as a result, are skeptical to what will be done with their private in-home data.<\/p>\n
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There will inevitably be privacy concerns with the digitization of the home, but it is important to recognize the value that this technology and its associated data has provided to the safety of homeowners. Nest is just one company in a wave of startups trying to capture a slice of this multi-billion-dollar market. It remains to be seen if they are the true winner in the space and will need to become ubiquitous in homes in order to reap the true benefits of these insurance partnerships. Regardless, Nest has been a pioneer in defining the unique role that connected devices and dynamic data will play in the home and in the insurance industry.<\/p>\n
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[1] From Nest Website, \u00a0https:\/\/nest.com\/thermostat\/real-savings\/<\/a> , Accessed November 2016<\/p>\n <\/p>\n [2] Nest Protect Users Get Insurance Discounts, Big Data Concerns, From Digital Trends, http:\/\/www.digitaltrends.com\/home\/nest-protect-insurance-discounts\/<\/a> , Accessed November 2016<\/p>\n <\/p>\n [3] From Nest Website, https:\/\/nest.com\/insurance-partners\/<\/a> , Accessed November 2016<\/p>\n <\/p>\n [4] Google’s Nest Announces Security Cam, Pushes Into Home Insurance Market, From Forbes, http:\/\/www.forbes.com\/sites\/aarontilley\/2015\/06\/17\/googles-nest-announces-security-cam-pushes-into-home-insurance-market\/#727172a41163)<\/a>, Accessed November 2016<\/p>\n <\/p>\n