日本の保険業界についての考察
In October 2023, I was in Tokyo for meetings with different insurance companies and technology providers. In this blog post, we will explore various insights and discussions from these meetings, shedding light on the innovative ideas and challenges facing the insurance industry in Tokyo.
Embracing Innovation and Risk Solutions
A non-life focused insurer is exploring innovative ideas such as auto insurance drive recorders that capture images even in non-dangerous situations. By providing such images, the insurer aims to lower manual tracking efforts. Additionally, they are considering selling non-insurance products to foster a culture of innovation within the company. The insurer also emphasizes the importance of cross-functional teams and risk solutions, offering products and services even before and after policy issuance. This insurer recognized that new technologies and models are crucial in addressing change.
Building Ecosystems and Embracing APIs
A technology vendor is collaborating with various insurance companies and technology providers to build portal sites and ecosystems. They are working with a technology consulting company and other core suppliers to provide a platform-as-a-service (PaaS) solution. Several insurance companies have utilized this vendor’s solution to modernize their legacy systems and launch digital products. The vendor has facilitated the creation of APIs for financial services companies, enabling them to enhance their portals, with the platform being adopted for products like group and travel insurance.
They are recognized in the Japanese financial services ecosystem and has received inquiries from numerous banks and insurance companies. However, there is a challenge in promoting the recognition of systems architectural design like microservices and clarifying the distinction between ecosystems and microservices. Also, the Japanese market has a different perspective on API usage. The vendor aims to provide value throughout the insurance lifecycle and focuses on end-to-end solutions rather than exclusive connections.
There is also a sentiment that Japan faces a shortage of engineers and current operations tends to focus on maintenance rather than exploring new technologies like Python and Kubernetes. The culture of experimentation and testing in the industry is not prevalent yet, and there is a lack of awareness about concepts like microservices and packaging.
Modernizing Legacy Systems and Co-creation
This global technology company in Japan is actively involved in modernizing legacy systems, particularly those based on COBOL and mainframe computers, which pose maintenance cost challenges for Japanese companies, including insurers. Some Japanese insurers are considering shifting from the mainframe to the cloud, while others are struggling to find success with cloud projects.
The modernization process requires collaboration between business and IT teams, with a focus on governance and control. Therefore, the company promotes co-creation and a new working style between IT and business teams, emphasizing the importance of joint ventures and education programs. As part of its own modernization, the company is adapting its working style, promoting group collaboration, remote work, and satellite offices.
They are also working with various insurance companies, including life and non-life insurers, to implement AI solutions and enhance their digital strategies. Generative AI, including ChatGPT, is being explored for enterprise use cases, but sensitive information like underwriting and claims requires caution.
Generative AI and Data-driven Strategies
A common topic discussed was on the utilization of the latest trend in the AI space, generative AI and LLMs. The usage of such tools is largely constraint to internal use cases today and act to learn about its usage, for subsequent application for external use cases like customer service and operations.
A top life insurer is focused on building knowledge stores and utilizing ChatGPT for internal purposes. They have completed phase 1 of a project involving a third-party vendor and are now working on phase 2 to make their database more accurate and domain specific. This insurer is keen on understanding the technology problems and constraints associated with building knowledge stores and prompt engineering.
Another life insurer is actively promoting the use of generative AI. Their Digital and Data Headquarter, led by the CEO and a Data Officer, focuses on utilizing ChatGPT internally. They work with various platforms by leading technology companies and consortia to develop ChatGPT using the Japanese language. The insurer also acknowledges the need to educate their teams on how to effectively use data science methods and to identify suitable vendors to support their operations.
A non-life insurer formed committees to established data product best practices and explore the use of generative AI in their domestic and international business. They focus on generating test cases and utilizing AI for project management, risk management, and RPA support. They emphasize the importance of governance, process view, technical guardrails, and security in their data product best practices. To modernize their current infrastructure which are facing end-of-life challenges, they are also involved in projects exploring successful migration strategies and regional support. Hence, topics on understanding IT trends, spending, and data sharing are of interest to the insurer.
Conclusion
Local Japanese insurance companies and technology vendors are actively embracing new ideas, leveraging AI technologies, and modernizing legacy systems. These efforts are aimed at improving customer experiences, streamlining operations, and driving growth in the insurance sector. The insurance industry in Tokyo is undergoing significant changes, which are a testament to the city's dedication to innovation and its willingness to adopt industry best practices. However, Japanese insurers are cautiously approaching industry change and it also signals a unique market which requires clear understanding of its needs in the pursuit of change and modernization.
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To learn more, Celent tracks this market and has research addressing it (list of recent reports here).If you would like to find out more, please feel free to get in touch with me.
Below are related reports contributed by Celent on this topic:
Musings About Asia Pacific 2023 – Kuala Lumpur, Malaysia
Takeaways from DXC Connect Insurance Executive Forum 2023, Singapore