Telematics and Japanese Insurer Business Strategies
Japan’s insurance industry is increasingly focusing on telematics-based insurance. One major Japanese nonlife insurer has, following the acquisition of a British insurer, announced that it will be launching mileage-linked insurance. (1) (2)
Celent has analyzed market trends in Europe and put forth the argument that the proliferation of telematics technology and insurance that draws upon this technology results in the following trends in the traditional (read non-telematics-using segment) of the auto insurance industry:
- Increases in the proportion of “problematic” drivers in the driver pool
- A rise in the cost base of auto insurance business operations
- Increases in frequency and amount of auto insurance claims
- A possible decrease in conventional auto insurance policy values and the number of policyholders
At the same time, the impact of these trends are significantly related to and swayed by the culture and accepted practices of the driving cultures of the countries and regions in question. As a result, companies need to take into account the global impact based on differences in vehicle culture and environment.
Based on this situation, Celent offers these three recommendations for Japan’s insurance industry:
Monitoring: How can companies harness the spread of new technology to better monitor and grasp changes in damages encountered by policyholders? Which department or section of a company should be tasked with the monitoring? A company-wide approach that spans and includes multiple departments—such as those in charge of managing risk, insurance accounting, and product development—will be crucial.
Analytics: What will next-generation telematics data entail? Will telematics improve the way that people drive? Are there ways to collect, analyze, and use the granular data such as from collision prevention devices and automated traffic violation prevention devices? These new technologies will provide new types of data and analysis methods that portend significant changes including in the setting of insurance premiums rates and underwriting.
Strategy: What issues should each business department have on their respective radars? How will this all affect key Are there potential business partners in other industries (such as automobiles, networks, or telecommunications) with which players should be seeking to collaborate? Being aware of these issues and building them into business plans for this year and next as well as reflecting them in mid- and long-term business strategies will be key.
(1) Acquisition of Shares of Box Innovation Group, a Major U.K. Telematics Auto Insurance Firm (Aioi Nissay Dowa Insurance)
(2) Mileage-linked insurance (Aioi Nissay Dowa Insurance)