Bitesize InsurTech: Neos
October 21, 2016 Greg Brown
Neos is a home insurance broker that has built its proposition around smart technology. Just this week they’ve announced a £1m seed funding round from Eos Venture Partners, investment from Gary Lineker (amongst others) and appointed Barry Smith as chairman of the board.
When you buy your home insurance through Neos, they’ll supply you with £650 worth of free gadgets – for example internet-connected smoke detectors, motion sensors, an HD camera and leak detectors.
They have also been developing a smart water-valve that measures water flow, detects leaks and allows consumers to remotely shut off water in the event of a leak. It also contains a machine learning based module that tracks a home’s normal water usage profile and raises a flag when this changes dramatically.
Now let’s cut to the obvious question – how do they cover the cost of the tech? According to Matt Poll, CEO, Neos believes that it can be funded by the model’s combined ratio advantage. In particular, Neos believe that it can:
- Reduce claims cost and frequency as the sensors supplied cover the three main causes of loss – fire, theft and escape of water
- Increase retention due to its differentiated proposition (which includes, for example, a 24/7 monitoring service for a small additional fee)
Neos is still in the early stages; they have recently started an early access trial with beta customers using Hiscox paper. Poll is pleased with the progress and the immediate focus is fine tuning the proposition: “We’re currently trialling different pricing options so we can offer the full service, including monthly monitoring, for the same or lower cost as traditional home insurance”.
Delivering a great customer proposition will always be important to Neos, and in the longer term data will play a key role. Neos will use the millions of datapoints they receive to get a much richer understanding of customers. This will help them price risks better and develop new products and services for their customers.
From what we’ve seen so far only Axa’s La Maison Connectée (press release, in French) combines tech and insurance as seamlessly as Neos. Otherwise propositions we’ve seen in this space just offer simple discounts on either the insurance or the technology when the two are bought together e.g. State Farm.
We like the Neos proposition a lot – and hope that their economic assumptions are correct so that this becomes a sustainable proposition. We like the fact that they have started with the consumer problem – “how do I use technology to reduce the hassle of things going wrong at home” – and positioning the insurance piece as the solution to the “worst case scenario”. That’s in contrast to most insurers in this space, who put insurance at the centre of the proposition.