Will Your Insurance Company Monitor You At Home?
A recent business transaction caused concern for me. It was that State Farm acquired part of ADT.
This was one of these lightning strike epiphanies that you get. Just after reading about it, my mind raced with all of the privacy and security implications that this could mean for us as families.
Now, partnerships between insurance companies and alarm companies have been around for a long time. On the surface, that sounds nice, but in this new age of technology and data mining, such acquisitions could be a major privacy concern for families.
State Farm Acquires Part of ADT
On September 6th State Farm announced they made a 1.2 Billion dollar equity investment in ADT. That means that State Farm now owns about 15% of ADT. This is a big deal and this is a bellwether acquisition. I think more insurance companies will be doing the same in the future. Maybe one will even launch their own alarm system.
As a side note, Google acquired 6.6% of ADT in August of 2020. Let’s keep that juicy tidbit in mind for later.
Why You Should Be Concerned About Insurance Companies Buying Alarm Companies
Are you familiar with the auto insurance product that is a device that plugs into your car and tells your insurance company how good a driver you are? The idea is that better driving habits you have like coming to a complete stop, not speeding, or not breaking hard will save you money on your bill.
Multiple companies have these Bluetooth devices that plug into your car’s OBD2 port. It then transfers data about your driving habits to your smartphone where what you do is reported to your insurance company.
A few years back my old insurance agent tried to sell us on this and told us that he had it on his car. He shared with us that morning that he braked really hard and was flagged for it in the app. My agent explained that he was breaking to avoid hitting a squirrel. So he had to petition the demerit on his driving profile for not hitting a squirrel.
Here we have a precedent for insurance companies collecting data that you voluntarily provide to them so they can make adjustments to your policy. The information is provided through a digital device that you put on your car, which sends them data that they use to judge your driving habits.
In great big broad terms what we see is an insurance company rewarding you for compliance with behavioral standards they set. In my opinion, drivers don’t need to have to prove that breaking hard to avoid hitting a squirrel isn’t detrimental to their insurance policy. I don’t like this for your car and now the possibility exists to do the same in your home.
Do you see a possibility of privacy concerns in your home?
If insurance companies have access to your home’s data like when your doors are locked, when your system is armed, water leak detection, cameras, and motion sensors They can glean a lot of information about what you do in the privacy of your home. And they are going to hold you accountable for it.
Before, insurance companies couldn’t gather this sort of data, so they have to find a way to know what was happening in your home. No one in their right mind is going to palace a camera in their home that their insurance company provides to judge their lifestyle. That’s insane. But if you couch this as "security with a discount", people will be much more open to being monitored.
Potential Realities
For fun let’s go over some futuristic hypothetical scenarios involving generic insurance companies that have invested in generic home alarm companies. Because I think there is going to be a lot of them.
Many home alarm companies offer smart locks that allow you to lock and unlock your door from your phone. Generally, I don’t support smart lock use. But for this hypothetical scenario let’s say you forget to lock your front door. Your alarm company alerts you in their app. You’re thankful and are able to lock your door from your desk at your office.
Let’s say this happens 2 or 3 times a month. Now you get an alert from your insurance company app saying your rates are going up because you’re not locking your doors, thus creating a riskier environment for the home the company insures.
You don’t want that right? So the insurance company offers you a free course on securing your home that you watch and pass a test. After that, your rate goes back down, part of it might be called - I don’t know - accident forgiveness.
Unfortunately, once again you forget to lock your front door even after completing a course on home security. Now the insurance company wants to raise your rates again. But to avoid this, you can give them permission to control your smart locks so they can lock your door for you.
And just like that, this insurance company can lock and unlock your door - all to keep a discount on an overinflated policy. You might find that one hard to believe. But given enough time, I don’t so.
Let’s do another hypothetical futuristic scenario, this is fun.
Proactive Monitoring
Many alarm companies offer smart home devices like water alarms that detect leaks near pipes, water heaters, and dishwashers. These are useful things to have.
Let’s say you get a leak detection notification on your alarm company app. You’ve got a small leak at your water heater. It’s no big deal so you go on with life, but you keep getting notifications about it.
Now your insurance company chimes in saying that you need to fix this leak before the situation gets worse. We’ll the situation does get worse before you can get it fixed and the water heater dumps 50 gallons of hot water across your attic.
Now you make a claim to your insurance company. But they won’t cover it because they notified you of the issue before it went bad and you will have to pay the cost out of pocket. And oh yea, your rates are going up. You didn’t comply like the company wanted so you have now violated the terms of your agreement.
At this point, I’ll remind you that many alarm companies offer devices like cameras, motion sensors, garage controllers, and smart plugs for all manner of things. Do you want your insurance company to pull data from all of those devices?
I suggest that your home alarm, cameras, smart home devices, and insurance all be different companies so that your data can be separate… for now.
I’m going to end all of my hypothetical scenarios. Below are the first three paragraphs of State Farm’s Statement on the acquisition. You can read the entire statement here. The emphasis has been added by the author.
BLOOMINGTON, IL (Sept. 6, 2022) – Today, State Farm announced a $1.2 billion equity investment in ADT Inc. resulting in State Farm owning approximately 15% of ADT after the equity investment and related transactions close. This partnership launches State Farm into a new category, allowing the company to reimagine the homeownership experience and innovate new ways to apply Smart Home technology to home insurance, with customer benefits that may include lowered costs, reduced claims, and smart home security devices that help to proactively mitigate loss caused by water, fire, or intrusion.
“As the industry leader, we’ve always recognized our responsibility to go beyond insurance and find ways to build stronger and safer communities for our customers and the neighborhoods we serve,” said Paul Smith, Chief Operating Officer at State Farm. “This partnership with ADT gives State Farm the opportunity to provide Smart Home technology that takes us from our ‘repair and replace’ model to a ‘predict and prevent’ mindset. These innovations will help us take the next step into the future of home insurance and add more value for our customers.”
As part of this new partnership, and by building upon ADT’s existing relationship with Google, the companies will combine next-generation security, innovative smart home technology and reimagined risk-mitigation capabilities to monitor, detect, help prevent and optimize against homeownership risks.
The more we allow any company into our home with smart devices, virtual assistants, home security, and monitoring the less private our homes become.
But hey, your insurance company is just looking out for you… like a good neighbor.
