Tech Will Take Insurance Where No Policy Has Gone Before
Insurance Experts' Forum, May 26, 2011
Wouldn’t it be great to have insurance protection for the unexpected little incidents in life that can’t be predicted, but can end up being annoying and costing money? Although insurance is our business, however, we don’t generally think of covering risks like burning one’s fingers while throwing some burgers on the barbecue. But why not?
Theoretically, a carrier could sell insurance for virtually any risk, but the reality is that some policies are simply not profitable to offer. All that may be changing, however, if the model now being developed in Japan catches on, and the driver is our ubiquitous and relatively inexpensive—wireless technology.
This information comes out of a session at the recent ACORD LOMA Insurance Systems Forum in San Diego, where session speaker Tsukasa Makino talked about the use of mobile technology to drive and complete a myriad of insurance transactions in Japan. Makino, manager IT Planning Department and Corporate Planning Department, Tokio Marine & Nichido Fire Insurance Co. Ltd., described the concept of “one-time” insurance that can be instantly purchased via mobile phone, and is in force for a few days, much like the airline flight insurance we already know.
Japanese companies offer a wide variety of low-cost, limited-period policies to cover many sports and leisure activities, including (yes) barbecuing, tennis, cycling, baseball, hiking and sea bathing. There is a huge convenience factor as well. For example, Makino noted, one could buy skiing insurance immediately before one started skiing.
One of the more interesting coverages, said Makino, is “hole-in-one” insurance for golfers, offered because this rare event is considered an “accident.” Why does one need insurance for such a happy occurrence? In Japan, he explained, anyone who shoots a hole-in-one is required by custom to give a lavish party and to provide gifts to friends and family to commemorate the event. The cost typically runs between $3,000 and $5,000, while the one-time premium for the insurance is about $3.00.
Since such policies are simply purchased via cell phone, smartphone or other mobile devices, and the transaction costs are very low, he continued. In addition, GPS-enabled devices permit insurers to offer these coverages on the fly based on geographical location, assuming the recipient customer allows such tracking.
In essence, the use of wireless technology has opened up a whole new line of business for insurers, one that could be very profitable. While Makino admitted that these policies are still a minor part of his company’s sales, he also hoped to see their popularity and profitability grow. Indeed, in our American culture with its emphasis on leisure and entertainment, one could see the appeal of such products to consumers.
The one fly in that ointment could be the question of privacy, but I suspect that younger American users—who seem not to be as concerned about privacy as older users—will find this interesting.
Insurers are always looking for new profit centers, and it may well be that this wireless-based delivery system will enable the profitable sale of such interesting and highly segmented products in the future. Our growing wireless infrastructure may actually take insurers—as Star Trek’s Captain Kirk might say—“where no policy has gone before.”
Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.
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