What is Insurtech IoT? And why do insurance companies need it? Scott Ford, CEO of Pepper, joins Ryan Chacon on the IoT For All Podcast to discuss insurtech and the role IoT is playing in the insurance industry. They cover the benefits IoT brings to insurance, who pays for insurtech IoT devices, consumer feedback on insurtech, install rates for upsells, the onboarding and interoperability challenges of insurtech IoT devices, and the future of insurtech IoT.

About Scott

As the CEO of Pepper, the leading U.S.-based full-stack, full-service consumer Internet of Things (IoT) platform, Scott Ford applies more than 25 years of wireless industry operations experience to driving the vision of the company forward.

Scott is also the co-founder and managing director of OpenAir Equity Partners, a wireless and IoT-focused venture capital firm. Prior to Pepper, Scott served as founder and general manager of Sprint Nextel Ventures, Sprint's corporate venture capital unit where he directed a team responsible for discovering, executing, and managing hundreds of partnerships delivering more than $1B in contract value.

Based in Kansas City, Scott holds a Bachelor of Science in management and human relations from MidAmerica Nazarene University and completed the Kauffman Fellowship in venture economics. He is a decorated Desert Storm Veteran and has flown more than 300 combat hours (3,000 total) aboard Navy P-3C aircraft.

Interested in connecting with Scott? Reach out on LinkedIn!

About Pepper

Pepper is the leading U.S.-based consumer IoT platform that enables businesses to build, deliver and monetize secure connected devices and services to consumers through a sustainable revenue model. Its consultative approach and recurring revenue model helps its partners harness the full potential of consumer IoT by increasing speed to market within three months. Based in Kansas City, Pepper has more than 6M end users and is trusted by leading consumer IoT brands, manufacturers, distributors, retailers, and service providers and has strong relationships in the InsurTech space.

Key Questions and Topics from this Episode:

(00:37) Introduction to Scott and Pepper

(01:17) What is Insurtech IoT?

(03:51) What benefits is IoT bringing to insurance?

(05:36) Who pays for the IoT devices?

(06:53) Consumer feedback on insurtech

(09:45) Can insurtech make getting insurance easier for high risk areas?

(11:29) Install rates for upsells

(13:41) Onboarding challenges for insurtech IoT devices

(15:43) Interoperability of insurtech IoT devices

(17:56) The future of insurtech IoT

(19:49) Learn more and follow up

Transcript:

- [Ryan] Hello everyone and welcome to another episode of the IoT For All Podcast. I'm Ryan Chacon, and on today's episode, we're going to talk about what insurtech IoT is and how IoT is playing a role in the insurance industry. With me today is Scott Ford, the CEO of Pepper. They are a US-based consumer IoT platform. So a lot of exciting stuff in this conversation.

Kind of a new conversation, something we haven't talked a lot about on the show. Before we get into the episode, please subscribe to the channel if you have not done so already, give this video a thumbs up and hit that bell icon so you get the latest episodes as soon as they are out. Other than that, let's get on to the episode. Welcome Scott to the IoT For All Podcast. Thanks for being here this week.

- [Scott] Thanks for having me.

- [Ryan] Yeah. Let's kick this off by having you give a quick introduction about yourself and the company to our audience.

- [Scott] Sure. My name is Scott Ford. I'm the CEO of a company called Pepper. Pepper is a venture capital backed platform as a service for allowing big enterprises to access the benefits of consumer IoT. So we build out the solutions on behalf of big enterprises that align with their strategic imperatives as well as their own branding and that type of thing.

So we're not a, Pepper's not a consumer facing brand at this point.

- [Ryan] Gotcha. Okay, fantastic. I know we had a bunch of interesting things we wanted to cover in our conversation today. The first one kind of focused on kind of the insurance technology side of things. For those of our audience who may be unfamiliar with that world, can you just set the stage for us and talk about what that is, what that means, and then we'll dive in further from there.

- [Scott] Yeah. Sure. I've always believed that the biggest sort of industry benefactor of IoT data was the insurance industry. And the notion there is that you have access to all kinds of data that can be used for more precise underwriting of homeowners auto policies but also serves as an early warning system to alert homeowners to, some sort of peril that may occur.

So that at a high level is a thesis inside of the insurance marketplace. What's happening today is that insurance carriers are essentially dabbling in insurtech IoT. So there are a handful of companies out there that have created devices that serve to deliver some of the benefits to insurance carriers.

Claims reduction and early warning. So those include water shutoff valves. Water is the number one claim in homeowners insurance. There are leak detectors, smoke and fire detectors a variety of things like that. So there's probably five different companies that are sitting there serving insurance carriers today.

The problem is those are all point solutions Single device, single app under the brand of the device. And so it's not very strategic to the insurance carrier, which is why I believe they've been only dabbling at this point. I think there is a realization though that the data that's being provided as part of these trials is very much relevant to the insurance business model and one big indicator of that is the $1.2 billion investment that State Farm Insurance made in ADT with the presumption that they're going to access all of the data there for the purposes of benefiting the insurance carrier business model.

- [Ryan] Gotcha. Okay, fantastic. And I know you obviously mentioned from your perspective, the insurance industry is one of, if not the biggest area that will benefit from IoT data that is now being pulled, but talk to us about how IoT is actually playing a role in the insurance space, what benefits it's bringing to individuals and insurance companies.

And then we'll kinda expand from there.

- [Scott] Sure. So again it's really the low scale today. Maybe there's a couple million devices in the market, which in insurance carrier terms would be very low scale across the industry. And, the consumer proposition is generally something to alert the consumer, before some sort of damage occurs.

Which is, the number one, claim is water, as I mentioned. So if you can detect the water leak before it becomes a problem that's, going to save the consumer and the insurance carrier a lot of money and time. So that's the typical consumer use case. When you start to layer in other home automation solutions like video surveillance and smart home security and things like that, that really broadens the ability for the insurance carrier to collect really relevant data that they then can use to better underwrite their customers. The market is really new and nascent. And I'm talking specifically about consumer lines of insurance, not business lines of insurance. We're focused on the consumer as the end user.

- [Ryan] And who's paying for the devices? Is that something that the insurance company is bringing in and selling to the customer? Or is it something that insurance companies are giving to the customer because if this help prevents claims, then it saves the insurance company like money down the line.

- [Scott] Yeah, it's all of the above. In some cases the insurance carrier completely subsidizes the device and the service. Other cases, it's discounted to the end user. And often, the insurance carriers will make it available for purchase from the end user.

So it's all the above.

- [Ryan] Or they, I've seen situations with auto insurance where if you put a tracker in your car, they'll discount your auto insurance. Is that kind of in the same realm as we're talking about here?

- [Scott] Yeah, and you can extend that to home insurance as well. So you get an auto insurance discount if you have it. If you have certain devices in your home you can get home discount up to 20%, which is real money. If the typical homeowner's policy's a thousand or $1,500, 25 percent of that is big savings.

- [Ryan] And how, what is the feedback like from consumers and the what I'm, I guess what I'm trying to ask is are there certain situations where devices are being well received as far as I think everyone can say wanting to understand and be preventative when it comes to a leak in my house is something that both sides can agree on.

But like for the auto side, I'm not sure if that's the case. Like I understand, at least personally from my end, my insurance company keeps telling me, Hey, if you install this, you're going to save money. But for me, I don't want them monitoring my driving habits. And so how has that reception been across different areas that you all have played in?

- [Scott] It's a bit of a mixed bag. And it's one of the problems that we Pepper are solving. The first issue is what we call install rate. An insurance carrier mails devices to a hundred people. The market install rate is maybe 60%, 65%.

And that's a big delta that they've got to close because that's very expensive equipment that they're subsidizing. But to your point, if it's not a utility to me as a consumer, why would I plug it in? So, I think people have to do a better job of bringing out the benefits to the consumer to get that conversion rate up. In the car, I think it's the same thing. Why would I let my insurance carrier make judgment on my driving behavior? And that's friction. Particularly if there's no consumer utility to it, meaning, is there an app that allows for a family tracker type of thing or is there a device that can go in the car that creates a Wi-Fi hotspot in the car?

So there, there are a lot of things that you can do to appeal to the consumer by putting these types of features in the devices and the services that you're providing.

- [Ryan] Absolutely. Yeah. The auto thing is interesting because my insurance company directly is saying no matter what, we're not gonna increase your rates. And I understand that, but I'm also not confident that you'll ever bring down my rates if you see the way I drive.

But it's an interesting thing. That's like where I first started to see how smart devices on a consumer level were being paired with the insurance company to help save money and things. So what you're talking about across other areas, like in the home is absolutely fascinating to kind of learn about. How about in situations where, and the reason I ask is my sister actually is used to live in Florida down in Key West and getting insurance down in those areas of the country are not always easy for certain kinds of insurance because of weather, natural disasters, things like that.

How are these, or how is the implementation of these types of devices potentially helping fix that and helping allow insurance that maybe wasn't achievable to be more achievable because of the data collected? I'm just curious how that's thought about.

- [Scott] Yeah, I think if there's a hurricane, very difficult. You could put a water sensor in your home, but it's gonna alert you to what ought to be obvious to you already that get out of town kind of thing. But in normal household activities where severe weather is not a factor or severe meaning a hurricane is not a factor, but you might have severe thunderstorms that end up creating a leak in your home.

These solutions are very good for that. They give you early warning allow you to connect with professional services to come help you and mitigate things. Insurance carriers love it because it reduces claims which is a big part of their model.

- [Ryan] Yeah, that's where my initial thinking was going, that it's probably a good thing for everybody. But I know it's tough kind of in those kinds of areas of the country, like hurricane for instance insurance and things like that. How does this, so you touched on it earlier and you said like all the above as far as who's paying for it, who's buying it, but what have you seen as when it comes to the install rate, the reception, when it is more of an upsell, when it's something like, like how is that really playing into the adoption?

And or maybe are there other kinds of business models that now being enabled because of access to this data and these different devices that customers are now using?

- [Scott] Yeah, sure. And if we're talking insurance, it's still the early days, so there's not a lot of data out there to talk about the increase in conversion when you add devices that provide desired utility to the end user. But the logic is there that says if you send me a leak detector and you send me a video camera and maybe a thermostat, yeah, I'm more likely to install those and control those inside of my insurance carrier's app, branded app.

And so that's how we're approaching the market is encouraging insurance carriers to embrace being at the center of the user's connected life, right? And so for very little investment, they can do that and get all of the data that they ever desired from IoT. And even the direct data from insurance related devices is golden.

But when you start talking about eight or nine or 10 devices in the consumer's home and the data that's collected and then analyzed from an insurance perspective, there's, household behavior becomes a proxy for the type of insured, right? And this is information you're not going to get in a credit report.

So it's real time information about a lot of things and activities that are occurring in a household and can help insurance carriers understand what type of underwriting risk a particular household might represent.

- [Ryan] Yeah, absolutely. And how are you seeing the, when it comes to the actual adoption of the devices by consumers, what challenges are you seeing that have them come across when it comes to following, like the guidelines to use the devices properly, installing the devices updating the devices, things like that?

Are you seeing kind of any challenges when it comes to that piece of the puzzle?

- [Scott] Yeah, you gotta be really explicit. Pepper acquired a company called Notion last year into last year. And so in the Notion case there are tutorials that are built into the application that guide the consumer of where they should place these devices. Because if it's not placed in a an appropriate place, you might have a huge issue and never know it.

That's an important piece of this, is that the devices are placed in the areas that represent the greatest risk. When you get to the sort of shutoff valves, these are devices that detect a leak and then shut off your water at the water main to prevent any further damage.

Typically that requires a installation by a plumber or some sort of professional. There's always friction when you have to do that, but that's, those are big benefits to the insurance carriers. So they're willing to consider subsidizing that.

- [Ryan] Makes total sense. Plugging something into an OBD port in your car is very different than installing something into a system that you didn't even install yourself in your house. Anything electrical or has to do with the sewage system or anything,

water system, I imagine, makes way more sense to make sure it's done properly. Because if the data is not accurate that they're getting, then it's useless for everybody. But what about, I guess the last question I have, I wanted to kind of learn a little bit about is the interoperability of these devices when it comes to the home, right?

The home, tons of different devices, tons of different kinds of connectivity going on at times. They have Wi-Fi networks, Bluetooth, there's tons of things happening in a home. Different stuff going on. How, and or even like outside of the connect, the smart products a person has, there's just different systems in their home.

They're all made by different brands, et cetera. How is that being handled when it comes to insurance companies being able to build it or sell or pass on a device to their customers? All the homes are different. All the way they're built and everything's unique.

- [Scott] That's been the sort of principle issue in this market forever, and it's the problem we solve. In terms of the insurance related devices, as I mentioned, there's a handful, five to six that are actively purchased by insurance carriers and deployed into the market. Each one of those devices are a separate instance of a use case and an app and everything else.

It's not branded to the insurance carrier. It's not, there's no interactivity between these devices, they're all just doing their own thing. That makes it really difficult for an insurance carrier to embrace and push beyond a trial phase. And so what we're doing is integrating all of these devices into a common platform, the Pepper platform, and then making those functions and controls available altogether in a common interface.

And so further, we are going to add everyday home automation devices. Thermostats and cameras and other things so that this insurance carrier customer who just integrated three of these insurance devices into this app can now access a large catalog of common devices that will also work inside of this app.

I think that's the future of things here is consolidate and make sure these things are interoperable.

- [Ryan] Yeah, that was actually my next question, like before we wrap up, is just what does the future of this space look like? So outside of the interoperability element of it, what other things do you see evolving from the early learnings of this space?

- [Scott] Yeah. So I think we're past the first sort of milestone here, which is the convincing of the industry that IoT data is going to impact their business. If nothing else, the State Farm investment in ADT is, put the industry on notice, right? So we're past that.

So everybody in the industry understands that it's valuable and the question is how, right? And so that's what we bring is a turnkey solution to be able to allow these insurance carriers to go as light or as heavy as they want into the connected device space. Certainly the insurance related devices have to be in the mix.

So if you're an insurance carrier and just want to provide that, those to your end users, that's fine. You run into the issue of end user utility and usefulness. But that's possible. We can enable an insurance carrier to become a home security company with central station monitored security. All the devices that are necessary to enable that at really good pricing to the end user or if the insurer wants to subsidize it. So that's where I see going. And I think you'll have some earlier adopters and more aggressive players than others.

But market is definitely moving in that direction.

- [Ryan] Fantastic. Really appreciate you coming on today to talk about this. This is something we've very lightly dabbled in in the past, but I haven't really had an expert come on and really dive into it deeply. So I appreciate your time. For our audience who wants to learn more about this topic, learn more about what you all are doing, follow up with potentially any questions, what's the best way they can do that?

- [Scott] Yeah, they can hit our website at pepper.me, m e, or our company that we acquired, which is Notion. That website is getnotion.com. And if you have a specific question, there's a way to contact us and we're pretty good at getting back to people pretty quickly. Yeah, there are a variety of ways to get ahold of us.

- [Ryan] Perfect. Scott, thank you so much for your time. Really appreciate it.

- [Scott] Yeah. Thank you.