Insurers’ migration into non-insurance services poised to accelerate

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13/12/2022 Article
Takashi Sasaki NRI General Manager, Insurance Integration Design Department

Insurance-like services gaining prevalence

The lines of demarcation around insurance are becoming blurred.

Tokyo Gas offers a protection plan under which it promises to promptly repair gas appliances whenever they break down for a monthly fee of ¥500 (or about $3.40). Two hundred thousand customers have already signed up for the plan. Tokyo Gas is now expanding coverage to include air-conditioners and plumbing. Tokyo Electric Power offers a similar protection plan for ¥200 per month. It covers gas hot water heaters and induction stoves among other appliances. The two protection plans differ in one important respect, however. Namely, Tokyo Gas administers its protection plan itself whereas Tokyo Electric Power's plan is an embedded personal property insurance policy) underwritten by Mitsui Sumitomo Insurance.

Japan’s Insurance Business Act defines an insurance business as one that collects insurance premiums in exchange for agreeing to compensate insured parties for losses due to certain chance events. Under this definition, insurance businesses include those that provide recompense in the form of services instead of money. Clarity surrounding what types of services do not meet the statutory definition of an insurance business has been increasing in recent years by virtue of so-called mini (i.e., low-value, short-term) insurance policies’ legalization in Japan and a growing corpus of No Action Letters issued by the FSA. This trend is ushering in an era where insurers find themselves competing with nonfinancial companies, like Tokyo Gas, that previously would not have been on their radar as rivals.

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