Japan’s leading insurers are brainstorming countermeasures against big payouts

TOKYO – Major insurance companies in Japan are urgently considering ways to prevent hail damage. Hailstorms frequently occur in response to abnormal weather events, and in some cases, insurance payments can reach tens of billions of yen (hundreds of millions of dollars) due to a single event, which can increase insurance premiums. The Mainichi Shimbun took a look at the specific measures adopted, including the introduction of hail assessment equipment developed abroad.

sudden hailstorm

On a late September afternoon, Kunitaka Aoki, 48, representative manager of Seiho Co., a plastic molding and processing company based in Tokyo’s suburban city of Hachioji, near Mount Takao, was surprised by an employee’s sudden announcement: “Boss! The cars are so bad.” was shot.” The cars parked outside were all covered in dents.

Company vehicles were damaged due to hail. The rain, which fell normally at first, gradually became heavier and then turned into hail. Within 10 minutes, hailstones about 5 centimeters in diameter were blown sideways due to a “hurricane-like wind”.

The damage was extensive. The hoods of five cars in the parking lot were collapsed, their windshields and door mirrors were shattered and completely destroyed.

The repair company the company did business with was flooded with repair orders and was told it would take three to six months to repair the damage. The company building itself was damaged, leaving holes in the plastic rain gutters. Even though the firm had auto and fire insurance, he was several million yen (over $10,000) out of pocket.

“How could something this bad happen in a hailstorm? If this becomes an annual event, we will need to take some countermeasures,” Aoki said.

Hailstorms tend to occur in spring and autumn, when there are large temperature differences between the ground and the upper atmosphere. Ice particles in cumulonimbus clouds are carried upward by updrafts and grow larger when they collide with other pieces of ice. These large, heavy ice particles then fall to the ground without melting, sometimes at speeds exceeding 100 kilometers per hour, which can crush vehicles and break home windows. Such events are called “hail disasters”.

State-of-the-art equipment is brought from abroad

In June, Aioi Nissay Dowa Insurance Co., in collaboration with an IT company, launched a free service to notify people about incoming hailstorms through an app, in addition to its existing notifications about typhoons, torrential rain and earthquakes. When hail approaches, users of the app receive notifications at least 30 minutes in advance encouraging them to move to a safe location to avoid damage from hail and lightning. When hailstorms hit Gunma Prefecture and other areas in July, one car dealership that received the app notification moved more than 20 cars (about 10% of their inventory) and managed to salvage some of their vehicles.

In July, the insurer also introduced equipment developed by an Australian company to assess hail damage by verifying the number and size of dents left in the vehicle. At 2.8 meters high and 3.8 meters wide, the equipment resembles a car wash. As the vehicle passes, multiple cameras capture images from various angles, accurately assessing damaged parts in approximately 90 seconds. Before this, surveyors had been sent to check the damage, which took about 40 minutes per vehicle. Due to its size it is not easy to transport the machine on a trailer but if there are a large number of cars to be evaluated the job can be carried out efficiently. A company representative expressed hope that this would allow for seamless payment of insurance claims.

Sense of crisis among insurers

Other major property and casualty insurers are also taking steps to protect against hail damage. Sompo Japan Insurance Inc., Chiba Prefecture-based Weathernews Inc. conducted demonstration experiments from September to November using an application provided to companies by . Sompo Japan employees and dealers install the app on their smartphones, and when the threat of hail increases, notifications are sent 30 minutes to three hours in advance. This allows dealers to move cars indoors or put thick covers over them. After investigating the effectiveness of the system, the company will decide whether to expand the system to other businesses and individual users.

In June, Mitsui Sumitomo Insurance Co. it also launched a service for individual auto insurance policyholders to notify them of hailstorm danger via mobile text messaging. When hail hit Gunma Prefecture and other areas in early July, policyholders who received the messages reportedly experienced a 25% lower claim rate than those who did not.

Tokio Marine & Nichido Fire Insurance Co. Similarly, it plans to add hail warning notifications to its application for policyholders.

So what encouraged these companies to focus on hail in the first place?

The answer is the hail disaster that occurred in June 2022 in the northern Kanto region of eastern Japan. Many vehicles were destroyed and more than 23,000 people contacted Aioi Nissay Dowa Insurance regarding damage to vehicles and property.

Those most affected were vehicles. If people have car insurance, they can file a claim and have the insurance cover the cost of repairs. However, the disadvantage of making a claim is that it reduces the insurance company’s “rank”, which determines the discount rate on insurance premiums.

If a car dealership is damaged by hail, the situation is serious. While private contract dealership insurance covers vehicles that are on display or in storage during hail, it generally does not cover customers’ vehicles that are being repaired, for example.

Although there are such cases where insurance companies are not responsible for compensation, the large amount of damage can directly affect the balance sheets of insurance companies. In the June 2022 hail disaster, Aioi Nissay Dowa Insurance and its group company Mitsui Sumitomo Insurance paid a total of 42.8 billion yen (about $278.39 million) in insurance claims. This amount exceeded their payments for typhoons and torrential rains that year.

The damage caused by hail is increasing due to global warming. In 2023, a hailstorm also hit Gunma Prefecture, and the group received 31.9 billion yen ($207.6 million) in insurance payments. Then, in April 2024, a major hailstorm hit Hyogo Prefecture in Western Japan’s Kansai region, where hail disasters are less likely to occur, leading to insurance payouts totaling 47.7 billion yen (about $310.37 million).

In January 2025, the four major non-life insurance companies will increase auto insurance premiums by 3.5% to 5%. Experts attribute this increase to rising repair costs due to inflation and rising labor costs, as well as the increasing severity of hail and typhoon-related disasters.

A representative of Aioi Nissay Dowa Insurance commented, “If the app helps more people, this will ultimately reduce the loss rate for insurance payouts, and I imagine insurance premiums will also decrease,” expressing hope that the hailstorm warning app will work. Creating a “win-win” situation for companies and consumers.

The question now becomes what level of understanding insurers can gain from policyholders by accumulating security measures.

(Japanese original by Aya Iguchi, Tokyo Business News Department)