On-demand insurance sees popularity surge in Japan

The popularity of short-term insurance policies, bought via a smartphone and only used when a policyholder needs specific coverage is growing in Japan. Insurer Tokio Marine & Nichido Fire Insurance has sold 6.5 million such policies since introducing on-demand coverage in 2012. Another Japanese insurer, Mitsui Sumitomo Insurance, plans to begin selling one-day "leisure" insurance, allowing customers to purchase coverage for activities such as mountain climbing or golf in 24-hour increments. 

A new type of short-term insurance that can be used for sports, leisure and day trips is becoming increasingly common in Japan.

Known as "on-demand insurance," the policy can be bought for short periods of time whenever necessary and can be purchased easily via smartphones. The introduction of such plans shows that insurance firms are looking for new ways to attract customers by responding to changes in people's lifestyles.

With people becoming increasingly budget-conscious, consumers are showing a greater interest in using and sharing goods and services only when necessary. As a result, insurance policies that offer short-term coverage "only when needed" -- marking a shift from traditional contracts that last for a year or more -- are becoming more common.

A good example of on-demand insurance is one-day car insurance. This plan can be bought by people intending to briefly drive a car borrowed from a friend or relative. The policy has emerged following an increase in the number of people, particularly young adults, not owning a car -- and has led to more contracts being sealed.

Insurance giants such as Tokio Marine & Nichido Fire Insurance Co., which began selling one-day car insurance from 2012 onward, have seen the cumulative total of contracts in this category hit 6.5 million as of the end of January 2018.

In April this year, Mitsui Sumitomo Insurance Co. will start selling "one-day leisure insurance," which can be bought in 24-hour units for outdoor activities such as golf or mountain climbing. The insurance can be bought easily via smartphones, with the fee simply being added to the consumer's monthly phone bill.

For activities such as skiing and snowboarding, a 500-yen insurance premium provides compensation up to 100,000 yen for injuries, and up to 300 million yen if the insurance policy holder causes injuries to other people or breaks objects. Until recently, short-term insurance was limited to overseas travel insurance, so the introduction of on-demand insurance, structured in 24-hour units, is a definite selling point.

In addition, Tokio Marine & Nichido Fire Insurance has teamed up with NTT Docomo Inc., and Sompo Japan Nipponkoa Insurance Inc. has joined forces with Softbank Group Corp. to offer on-demand insurance. Sompo Japan's insurance-related revenue in 2017 reportedly increased by 20 percent compared to 2016.

Moreover, on-demand insurance for objects has also entered the market. Warrantee Inc., an Osaka-based IT venture firm, released an insurance app in November 2017, which provides compensation for broken digital cameras within three years after purchase, at a fee of 39 yen per day. The insurance can be used specifically on days when consumers go out carrying digital cameras.

The insurance payouts are handled by Tokio Marine & Nichido Fire Insurance, Mitsui Sumitomo Insurance, and Aioi Nissay Dowa Insurance Co., and the app had been downloaded 3,000 times as of mid-February 2018. There are plans to extend this type of insurance to computers and household electronic goods, with the aim of securing 100,000 contracts per year.

In April 2017, Sompo Japan invested in a venture company in the U.S. that has been developing on-demand insurance for personal belongings, with plans to start operations in Japan in mid-2018.

"We are proactively pressing ahead with the development of goods and services that can respond to diversifying needs," says Mitsui Sumitomo Insurance.

Competition in this new field of on-demand insurance looks set to become increasingly tough.