IoT in Insurance & the Outlook for Japan（日本の保険業におけるIoTの展望）

Insurance is perhaps the industry that will see the biggest impact from the rise of the Internet of Things, as the lifeblood of insurance has always been data. Therefore it should come as no surprise that the emergence of massive connected sensor networks, which are now collecting both new kinds of data and existing data more frequently, have already led to the introduction of new products, services, and perhaps most interestingly, business models. IoT is already making a significant impact in a variety of insurance sectors including automotive, healthcare, natural disasters, and property, and this trend is expected to accelerate in the future as IoT technologies become more sophisticated and widespread.
Going forward, the insurance industry should be the first industry to embrace IoT as demographic changes and new technologies will significantly disrupt the sector. In the US market, millennials are notoriously averse to buying things, preferring instead to use share-economy services. Hence, in the long run, if younger generations are not buying cars and houses, opting for Uber or Airbnb, they will also not be buying insurance for these items. Looking further out, fully autonomous cars are expected to be widespread by 2030-2035 and in theory could eliminate or at least significantly reduce the need for automotive insurance. Therefore it is critical that insurers explore new products and services that IoT can create.   

How is IoT Transforming the Insurance Industry?

As there are many different types of insurance, various use cases have emerged in different sectors.  One over-arching theme is that IoT is rapidly giving rise to Usage-Based Insurance (UBI) where an IoT device is able to monitor real-time usage, such as how much a person walks in a day or how a car is driven, and connect this to insurance rates. UBI is a key topic going forward as new business models are being created from it. The main insurance sectors adopting IoT are the following:

Automotive Insurance: Automotive insurance is the most advanced insurance sector in terms of IoT adoption. Automotive companies are using sensors in cars to monitor dangerous driving behavior and adjust insurance rates accordingly.

Health Insurance: Health insurance is another major area of activity in terms of IoT in insurance, and currently the key products are wearable devices. Many health insurance companies are offering various incentives for consumers to maintain an active lifestyle and reward users accordingly for exercise.

Property/Home Insurance: Property and home insurance companies are using IoT to detect hazards like water and gas leaks, and are hence able to address these issues immediately before a large amount of damage can take place.
Natural Disaster Insurance: Wireless sensor networks in places that are high risk for natural disasters can alert companies when conditions are right for a forest fire, flood, etc. Drones are being increasingly used to monitor damaged properties and assess damage, which is currently time consuming and may present dangerous working conditions. 

Exhibit 1: IoT Usage in Health Insurance in the USA