There is plenty of room for new and disruptive tech in Japan’s insurance industry, particularly in the health space, as the market grapples with a rapidly ageing population and a rising trend of obesity. The InsurTech Japan Roadshow, organised by InsurTech Asia Association in October, brought a cluster of eight InsurTech start-ups – from across Australia, Belgium, Canada, Germany, Singapore, Taiwan, UK and the US – to Tokyo for a deep dive discussion on the opportunities that these new-age disruptors present. Here are some key takeaways.
By Chia Hoe Seng
1. Declining Property & Casualty Portfolio, Ageing Population & Obesity: Opportunity for HealthTech to Disrupt
Japanese insurers are bracing for a decline in the motor business due to an increasingly ageing population, a stagnating GDP trend, and millennials’ general lack of interest in driving. To address this shortfall, they are turning their attention to health insurance, where there is a huge opportunity, given rising healthcare costs that are putting a huge strain on the National Healthcare System, which also has a number of exclusions from its policy.
Health2Sync, a HealthTech company focused on combating diabetes by engaging its users through its mobile app, caught insurers’ attention as Japan’s diabetic population recently hit an all-time high of 10 million this year. As such, the use of third-party health solutions to improve one’s health, along with customer engagement – narrowing the traditional gap that typically exists between an insurer and its customers – has garnered strong interest in the market.
2. Data Privacy a Critical Consideration
While obtaining an insurance licence requires a full suite of capabilities from actuary to capital and compliance requirements, InsurTech companies in the areas of data analytics, operations & digital engagement are perceived as technology vendors, which do not require a licence from Japan’s Financial Services Agency (JFSA).
However, while the Insurers are excited on the various tech solutions, data privacy is a concern that remains high on their agenda. Key considerations for InsurTech partnerships are:
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Data has to be stored and hosted in Japan
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Getting individual consent for data collection
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Data anonymity is critical when it comes to data transfer for analysis
3. Customer Engagement is Top Priority
In other parts of Asia, insurers have leveraged on a variety of InsurTech solutions for customer engagement, claims, distribution and operations. In Japan however, the insurers have indicated improving customer engagement tops their list of priorities.
Despite developing their own apps for customers to manage policies, insurers still lack data in understanding their customers better, primarily because the app features are still a transactional service.
The main hurdle market players face is getting individual consent to share data with them and realising the value they get in return. Thus through InsurTech, insurers hope to adopt new innovative ways to bridge the gap with their customers.
4. Important factors for InsurTech collaboration
By and large, Japanese society remains very risk adverse, SMEs and large corporations tend to be resistant to change. While the concept of start-ups is still relatively new in Japan, the market is slowly warming up to InsurTech. At present, local companies are adopting a more conservative approach, preferring to wait for success stories to emerge in the market.
For InsurTech companies looking to enter the market, the common considerations from insurers, in order of importance are:
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Existing local partnerships (including non-insurance)
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Other competitors
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Local office establishment
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Collaborations with other Japanese insurers in Asia (excluding Japan)
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Proven case studies in other markets
Throughout these considerations, proficiency in the local language also serves as an advantage for any potential market entrant.
In addition, for those looking to work with foreign insurers in Japan, it is imperative to note that local operations are likely to adopt a slightly different approach from headquarters due to the nature of the Japanese market; local teams have the autonomy to decide on its courses of action.
5. Next Steps
Given the history of established processes deeply rooted in its culture and industry, InsurTech in the land of the rising sun is still in its infancy stage and thus needs time to evolve. Unlike in more internationalised markets like Hong Kong and Singapore, insurers in Japan are looking for long-term and trusted partnerships with the InsurTech companies. They are also unlikely to disrupt their main distribution channels, which remain the core of their businesses.
InsurTech companies may want to time their entry into the Japanese market, given that local insurers are more inclined to partner an established service provider/vendor. An alternative could be that start-ups could pool their resources and adopt a shared-services model to debut in the country. A