The fact that Japan boasts less than 20 InsurTech startups – far lesser than any other major insurance market – can be surprising to many. Japan’s insurance market is after all the third largest globally by insurance premiums and the country is working towards becoming an international finance hub.  

This brings about the question of whether a country’s insurtech sector should be judged by the number of startups operating there or the success of these startups. As the common saying goes, it is quality rather than quantity that matters - which is perfectly applicable to Japan’s insurtech sector.  

The future looks promising for Japan’s insurtech startups with them receiving increased attention from insurers, continuous capital investment and top-tier talent. Concurrently, the Japanese insurtech market is also growing upwards with expected sales of JPY 246,000 million in 2022 and JPY 280,000 million in 2023 as shown below. 

  

Source: Yano Research Institute, “Insurtech Market for Life Insurance in Japan: Key Research Findings 2019”, 2021 

A flourishing insurtech ecosystem 

Over the past few years, leading Japanese insurtech startups have started receiving funding from major venture capital firms and insurance companies. The development is in tandem with more venture capital firms worldwide covering the insurtech area and investment activities becoming more active. Globally, investment in the insurtech domain crossed all records and exceeded USD 10bn in 2021.   

Concurrently, increasing numbers of actuaries and other professionals with experience in the insurance industry have established their own insurtech startups or joined management teams at existing ones, although several top-tier talents in Japan still prefer to work for large corporations.  

There is also a growing trend of global insurtech startups coming into the Japanese market and working with Japanese insurers. Such trends appear to be enabling the insurtech startup ecosystem in Japan to further develop and flourish – revealed a recently published report by Plug and Play Japan.   

Examining insurtech trends from various perspectives, the report features interviews with major Japanese insurance companies, domestic and international startups with activities in Japan, and incubators involved in the Japanese market including Daido Life Insurance, MS&AD Ventures, Nippon Life Insurance, Sureify Labs and Warantee. 

Different business models 

Japanese insurtech startups came into existence around 2016 and currently, there are 16 startups which can be categorised into six distinct business models namely digital distribution, policy management tool, backend as a service (BaaS), peer-to-peer (P2P) insurance, sales support and on-demand insurance as shown in the map below. 

 

One of the first insurtech startups to be established in Japan, JustInCase is the only one in the Japanese insurtech ecosystem operating three business models (BaaS, on-demand, P2P insurance) in this domain. The insurtech is also a licensed P&C small-amount, short-term insurer offering five purely online insurance solutions, including COVID-19 insurance, P2P deferred payment cancer insurance as well as AI-powered mobile phone insurance.  

Another notable on-demand insurance provider is insurtech Warrantee which provides free warranty and insurance for its users. Through a patented system, companies looking to promote their goods and services pay Warrantee a sponsorship fee. Users are covered by the sponsorship fee through the warranty should they experience problems and they consent to give their data to the sponsoring companies for marketing purposes in exchange for not having to pay premiums.  

Warrantee is looking to expand services to Southeast Asia or Asia in the future, its CEO Yusuke Shono told Plug and Play Japan in an interview. He also noted that insurance premiums in Japan are relatively lower compared to other countries and if insurance could be provided for free, that would be beneficial for households.  

Insurer x Startup  

Outside the insurance sector, Japanese insurers are actively embracing startups and paying more attention to startups in general according to MS&AD Ventures managing partner Takashi Sato in an interview with Plug and Play Japan.  

He also mentioned that there is a significant increase in proactive approaches from Japanese insurers to startups that go beyond the insurance domain with insurers being particularly interested in firms that have data as a competitive advantage.   

An example of this would be MS&AD Insurance Group approaching GIC, a US start-up taking aerial images, to attract GEOSITE, an enterprise SaaS platform for spatial data, to enter the Japanese market and form a business partnership based on developing aerial photography-based disaster prevention/mitigation solutions and expedited insurance claim processing. 

Such instances of collaboration between Japanese insurers and global or local tech startups could pave the way for further innovation and bring about new insurance products as well as novel ways of claims management in the Japanese insurance sector facilitated by insurtech.