Reform of Insurance System by InsurTech (2/2)Reduction of insured accidents by utilization of IoT

This article is written by Mr.Koichiro Ohira, Senior Fellow, Institute for International Socio-Economic Studies（NEC Group）

Merits for both parties
In the previous issue I covered how AI is utilized in the insurance business and the change of sales channel seen as a result.In parallel with that evolution the utilization of IoT (Internet of Things) is widely focused and attracting attention. 

For the insurance company the payment of relevant insurance is categorized as expenses. They are, therefore, incentivized to reduce such expenses, while insurance policy holders are wishing to reduce accidents and to achieve aged and healthy life.Both parties are sharing the merit of reducing accidents.

IoT is getting utilized lately to accelerate the reduction of such insured accidents.

Among many insurance categories the car insurance is advanced to utilize IoT technology.In USA many insurance companies are offering car insurance where the insurance premium is adjusted by driving distance measured and collected by the special IoT device attached to the policyholder’s car.

It is expected in the near future that insured driver is properly notified of the possible risk by the accident prediction system with car-mounted camera. This kind of service will be further powered in order to reduce accidents.

For residence insurance British insurance company Neos is offering such insurance as combining the insurance for the residence and household goods, with assistant and monitoring service with a variety of sensors.

Sensors offered are water leakage sensor, smoke detecting sensor, window glass breakage detecting sensor and so on. They can detect possible fire, water leakage, and burglary.

A variety of insurance products under development
Wearable devices are used to collect the physical conditions of policy holder and these data are utilized for relevant life insurance and medical insurance.Currently in most cases the wearable device is used to collect the number of foot steps of policy holder to be contributed to the possible reduction of insurance premium.If more variety of physical data are collected, more variety of insurance products might be developed accordingly.

As a new business model P2P insurance is developed recently where users are collectively contributing the insurance premium and are receiving the insurance if the breakdown and damage of specifically agreed article and product. Typical example of this P2P insurance is the insurance for householding goods offered by Monade in USA.

On demand
On-demand insurance is also attracting the attention in the market. On-demand insurance is such insurance as contracted and insured only for the limited time and hours during sports, leisure, and travel.

By installing and using smart phone application user can simply apply for the insurance, request for insurance payment, cancel the insurance and so on. This on-demand insurance is in line with the sharing economy and relevant developments are now in progress.

In order to enlarge the business of InsurTech the involvement and contribution of start-ups who are well in knowledge of necessary technology and are in a position to propose efficient service are substantial and are expected to develop new service and products in collaboration with conventional insurance companies.

For example, LLOYDS, underwriting insurance in UK, is opening accelerator “Lloyd’ Lab” in the head office building where start-ups are invited to open their own lab facilities.

As explained above more and more evolution is expected in the field of InsurTech by a variety of new players.It is also expected that InsurTech can contribute to establish such society where people can spend their safer life as a large number of different risks people will face will be efficiently and effectively covered and solved by InsurTech.