ITC Asia spoke to Chang Li, VP, Insurtech and Fintech, Plug and Play on the InsurTech trends in Japan and customized services and products are increasingly in demand with most industries, including insurance. 

Amidst the backdrop of an aging population and persistently low-interest rates, the insurance industry finds itself at a fascinating crossroads. These challenges, while formidable, are also catalysts for innovation. Japanese insurers are embracing the winds of change with open arms, exploring avenues such as seamless insurtech integration, the adoption of sustainable practices, the pursuit of novel distribution channels, and even venturing into international markets. This article serves as a testament to the industry's resilience and adaptability, shedding light on a promising future where Japanese insurers boldly chart their course through the ever-evolving global insurance landscape.  

Continued Focus on Digital Transformation  

Amidst the ever-evolving landscape of the business world, the insurance industry stands out as a bastion of tradition and stability. Yet, as Chang aptly puts it, "Increasing investments in DX (Digital Transformation) and innovation will continue. Since insurance is one of the most conservative and stable industries, people always forget the reasons to keep investing in innovation." These words serve as a stark reminder that even the most entrenched sectors cannot afford to rest on their laurels. 

In fact, the insurance industry faces pressing challenges in the form of a continually shrinking domestic market and a decline in the working-age population. These factors, as Chang points out, act as strong motivators, prompting insurers to be more proactive in reshaping their business strategies, nurturing a culture of innovation, and embracing the array of digital tools at their disposal. 

Personalization has become a cornerstone of the insurance industry's digital transformation. Insurers in Japan are leveraging big data and analytics to gain insights into customer behavior, preferences, and risk profiles. For example, customers may receive tailored auto insurance rates based on their driving habits, or life insurance policies that consider their specific health and lifestyle factors. This trend not only enhances customer satisfaction but also helps insurers better manage risks and improve profitability. 

Find out more about the uniqueness of the Japanese market in the context of global insurtech trends through Plug and Play’s Insurtech Report 2023.  

Regulatory Changes 

The regulatory landscape, embodied by institutions such as the Financial Services Agency (FSA), plays a pivotal role in fueling innovation within the insurance sector, Chang notes. FSA's proactive approach is exemplified by the establishment of the "FinTech PoC Hub" in 2017, a resource designed to allay concerns commonly associated with uncharted Proof-of-Concept experiments conducted by FinTech companies and financial institutions. This hub offers steadfast support, assisting these entities in deciphering the legal and regulatory intricacies governing the provision of financial services that harness emerging technologies and concepts. 

Additionally, a substantial regulatory transformation unfolded in November 2021 when the law governing the creation of multi-industry one-stop service intermediaries—covering banking, securities, and insurance—was amended. This pivotal shift permits all intermediary businesses in these sectors to operate under a unified Financial Services Intermediary Business license. This regulatory pivot not only streamlines operations but also provides insurers with the opportunity to explore innovative collaborations with other industries to redefine insurance distribution strategies.  

Recently, the payment of salaries in digital form has been permitted starting from April 1, 2023. “From the societal level, this is a sign that Japan is moving towards a cashless society, and people will become more accustomed to digital payment and financial services,” says Chang.  

Aging Population in Japan 

Japan's demographic tapestry is woven with a unique thread—aging at a pace unmatched by most nations on our planet. This demographic trend is a result of declining birth rates and increasing life expectancies. The consequence is a significant shift in the age distribution of the country's population, with a larger proportion of people entering their senior years.  

The growing elderly population in Japan has led to an increased demand for long-term care insurance as seniors require support for daily activities due to age-related or health issues. This insurance is essential to prevent seniors from becoming a financial burden on their families. Simultaneously, the nearing retirement age of a significant portion of the population has driven the demand for retirement and savings products, such as annuities, to ensure financial stability during retirement. 

Chang further emphasizes the need to tailor offerings to the evolving expectations of both seniors and younger generations, stating, "With Japan becoming an aging society, it is important to tailor needs to senior customers, but also to notice the changing mindset and requirements that younger generations have." 

Amidst these challenges and opportunities, Japanese insurers are embracing sustainable practices, expanding their reach through new distribution channels, and venturing into international markets. This dynamic environment underscores the resilience and adaptability of Japan's insurance industry, poised for continued growth and relevance in a rapidly evolving global landscape. 

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