Insurtech in Asia Series: Japan
Tackling the challenge of mature and growing insurance markets
The Insurtech in Asia series has been analyzing the insurance market and insurtech trends in various parts of Asia. In our report on Singapore, we focused on four key areas for innovation (insurtech, digital insurers, innovation labs, and collaboration with technology vendors) based on our observations of the city-state. The Greater China and Southeast Asia report provides an overview of insurtech and insurance core platform providers in Greater China (Mainland China and Hong Kong) and Southeast Asia (Indonesia, Thailand, Vietnam, and Singapore).
In this third part of the series, we will introduce the maturing and growing insurance market in Japan and profile the insurtechs that are taking on the challenge.
Global and Japanese insurance markets
In post-pandemic 2020, premium income in the global market was -2.1% (life -4.1%, non-life 1.1%). By region, the decline was particularly large in Japan and Western Europe, with Japan -7.7% (life insurance -9.6%, non-life -1.1%). Looking at the global market as a whole, premium income is expected to recover to pre-pandemic levels by 2022.
But the recovery will not be uniform due to responses to the Corona disaster and other factors. Recovery is expected to be slow, particularly in Western Europe and Japan (Japan: -1.9% [life insurance -2.2%, non-life insurance -0.8%]).
Due to the increased awareness of risk triggered by the pandemic, the response to sustainability, and the spread of insurance in emerging markets, premium income is expected to grow at an annual average of more than 5% worldwide (including 5.6% in life insurance and 4.6% in non-life insurance), but Japan will not reach this level.
As for the share of premium income by region (life and non-life combined), the shares of Western Europe and Japan, which had the largest share in 2010, are expected to decline significantly, while Asia is expected to continue to increase substantially. This will shift the global center of gravity of the insurance business from West to East, from the US and Western Europe to APAC, and from mature countries such as Japan to China and other regions.
Innovation opportunities in the Japanese market
Life insurance
Celent analysis shows significant opportunities in the third sector, especially medical insurance.
Drastic changes in the health care environment and alteration of lifestyles due to the Corona disaster are accelerating the need for short-term variable insurance instead of long-term fixed and accelerating the need for policy management systems and policyholder support systems to meet this need.
Non-life insurance
Celent analysis finds opportunities in the following spaces: Automobile insuranceーrevision of premium rates and introduction of the new rating system, Fire insuranceーrevision of premium rates and introduction of new services, New types of insuranceーconstruction work, general movable, machinery, liability.
Even in mature markets (traditional life insurance and non-life insurance markets), new risks are emerging as new lifestyles and industries are created, and insurance needs are increasing. The need for “PAYD-type” and “PHYD-type” insurance is increasing in all insurance lines, and flexibility and automation of policy management and rate calculation will be required.
Small-amount short-term insurance
Celent analysis recommends that time-to-market (product design, policy terms, and conditions, systems) determines everything, and digital is a prerequisite.
Given the size and profitability of the business, it is obvious that fixed traditional IT is inappropriate, and experience in growing markets will provide various insights for mature markets. Technology is the key to both reducing costs and enhancing customer experience.
Changes in lifestyle, social environment, and industrial structure are creating rising needs in mature markets to accommodate new risks. Strategic flexibility (securing the ability to select a new strategy) is the top-priority challenge—and system and technology can enable this.
In both mature and growth markets, technology should be made an ally. Securing strategic flexibility and developing a clear strategy is key. In particular, in tackling challenging markets bold tactics would seem to be essential.
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Check out my latest Celent Report: Insurtech in Asia Series: Japan
https://www.celent.com/insights/834574557