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Japan: Digital insurance & the drive for customer-centricity

Japan—with a population of some 128 million people—is an insurance market rife with paradox.


It is the world’s second-largest market for insurance products and services, yet just four large insurance companies dominate with a combined market share of over 95 percent.

Its tech-savvy consumers lead the world in their adoption of technologies such as smartphones and mobile gaming, but its enterprises lag their customers in leveraging those interfaces to create compelling customer experiences. And although Japan’s government has set a national agenda of growth and innovation ahead of the Tokyo Olympics in 2020, most insurers are struggling to innovate within the boundaries of their own enterprises.

Accenture Financial Services Managing Director, Mark Halverson, is working closely with Japan’s leading insurers as they embark on their quest for digital transformation and customer-centricity. He says that Japan will, in many ways, be a bellwether for the demographic and technology changes that will impact insurers in aging countries over the decade to come.

“The market dynamic in Japan is very interesting,” says Mark. “After years of consolidation with a view to improving their expense ratios, Japanese insurers can now focus on growth and the customer experience.” But Japanese insurers face many hurdles as they seek to grow and innovate—including a strict regulatory environment, a shrinking population, and risk-averse organizational cultures within the largest financial services groups.

Mark believes that the ways in which Japanese insurers address these challenges will hold many lessons for those in the rest of the world as they embark on journeys of digital transformation. The ways in which the mega-trends identified in the Accenture Technology Vision for Insurance for 2014 are manifesting themselves in Japan will be particularly interesting to watch.

Read more about Accenture Technology Vision for Insurance (2014)

Mark Halverson
Managing Director, Insurance


Mark says that Japan’s insurance sector is being shaped by the following key trends, among others:

The aging population—Japan’s population shrank by a record 244,000 in 2013 and more than a quarter of its population is currently aged over 65, according to government statistics. This trend is impacting premium growth and income across the board for P&C and life insurers.

The mobile explosion—Japanese consumers are eager adopters of mobile technology. Smartphone penetration is high and multiple studies have found that the Japanese are among the world’s biggest spenders on smartphone applications and games.

Regulation—Japan’s Financial Services Agency is one of the world’s strictest and most feared insurance regulators. This ensures that Japan has one of the world’s most robust and stable insurance sectors, but it also curtails opportunities for growth and innovation.

Consolidation—In the past decade, Japanese insurers have embarked on a series of mergers and acquisitions, with the result that the market is dominated by a handful of players of massive scale. They have excellent cost discipline, but they are struggling to find ways of growing domestic income in a mature market with high levels of insurance penetration.

International expansion—Faced with a diminishing opportunity for domestic growth, Japanese insurers are looking to international markets. Many have targeted high-growth emerging markets in South East Asia, such as Thailand and Vietnam, for expansion.

Tokyo 2020—As Tokyo gears up to host the 2020 Olympics, Japan’s government is making innovation and investment key national priorities for the next years. Tokyo’s famous bullet trains are the legacy of the Olympics in 1964. The next Olympics could catalyze digital innovations of similar significance.


Insurers around the world are wrestling with the challenges of leveraging digital technologies to deliver tailored experiences and become more customer-centric—and nowhere is this truer than in Japan, says Mark. Domestic conditions have made it imperative that insurers leverage digital technologies to build customer relationships at scale and create new ecosystems of value; yet regulation and organizational cultures have held back innovation.

Mark says that one fascinating element of Japanese business is that it is at the forefront of ‘convergence’ because so many of its businesses are interlocked conglomerates (keiretsu) with diverse, overlapping interests across industries. This points to how insurers around the world should be looking for new contestable market spaces to target with partners from other industries.

It’s also worth looking at how Japanese insurers are helping other Japanese companies expand into new markets as they internationalize—forming new ecosystems of value as business advisors to companies grappling with the legal challenges of new territories. Finally, Japan’s aging population is prompting insurers to look at innovative life and health products—cancer insurance is one—an example insurers in other aging countries will increasingly emulate.

Looking at how Japanese insurers are being affected by the trends in the Accenture Technology Vision for Insurance for 2014, Mark says that many of the challenges will seem familiar to insurers in other countries. Japan, meanwhile, also points to some of the emerging opportunities these trends bring for agile insurers that commit to digital transformation.

Digital-physical blur

Trend: The real world is coming online as smart objects, devices and machines increase our insight into and control over the physical world.

Japanese manufacturers have led the world in their adoption of leading-edge technologies and processes, including factory robotics. It’s not surprising that the country is also a leader in making and employing ‘edge devices’ such as unmanned aerial vehicles (drones) in rice fields as part of an innovative push towards precision agriculture, says Mark. Insurers in Japan have been proactive in understanding the impact and underwriting risk for unmanned vehicles, taking on the valuable role of defacto regulator for these innovations.

Global lesson: Insurers can enable disruption by underwriting the risks of emerging technologies.

From workforce to crowd source

Trend: Cloud, social and collaboration tools and technologies now allow insurers to tap into vast pools of human resources across the world, many of whom are motivated to help.

Recognizing that their ability to innovate from within is limited by their organizational cultures and skill sets, Japanese insurers are increasingly looking at new structures and working arrangements to foster disruptive ideas. Accenture is working with Japanese insurers on concepts such as incubators and accelerators where firms can tap into the wisdom of the crowd to nurture creative ideas in an environment similar to that of a start-up, says Mark.

Global lesson: Breakthrough innovations may need to come from outside the traditional boundaries of your own organization.

Data supply chain

Trend: Insurers must start treating data more as a supply chain across the entire organization and eventually throughout the organization’s ecosystem of partners too.

Accenture is working with a number of Japanese financial services companies that are looking at new ways of monetizing their data. For example, some are exploring the collection of vehicle telematics data that is of possible interest to public-sector clients, automobile manufacturers and others. Or they could use this data to create new data-centered businesses—for example, they could leverage data to provide lifestyle services and information to their customers, such as traffic information to auto insurance customers, or health and fitness services to health and life customers enabled by data captured through wearable computing.

Global lesson: Data is valuable, and even more so when you sell or share it.

The business of applications

Trend: Mimicking the shift in the consumer world, enterprises are moving rapidly from applications to apps.

Japanese consumers have been early adopters of mobile technology. Everywhere you look, you will see people playing games on their mobile phones, tablet computers, and handheld gaming consoles. Yet insurers have not yet managed to seize the opportunity to use the mobile phone for sales and service, says Mark.

There is an excellent opportunity for gamification, especially, believes Mark. For now, the dramatic majority of insurance interactions are face-to-face through agents because insurers have not been able to leverage direct channels effectively as yet. There is a similar ‘experience gap’ in other countries—outside of tech disruptors such as Facebook and Google, few organizations seem able to grasp the implications of new channels and technologies as quickly as do consumers.

Mark believes that the ‘high-context’ nature of Japanese as a language is one reason that digital channels have not yet taken off. Unlike English and most European languages, Japanese depends heavily on non-verbal cues as additional context to deliver the full intent of the communication. That could be a catalyst for more rapid video enablement in Japan and other high-context languages and cultures than in the West, says Mark.

Global lesson: Don’t get left behind by your customers’ adoption of technology.