[OECD roundtable] japan insurtech challenges

Copyright © 2017 Mori Hamada & Matsumoto All rights reserved.‐ 0‐
Technology Adoption in Japan’s Insurance Industry and
Regulatory Challenges
©2018 Mori Hamada & Matsumoto all rights reserved
April 2018
Masakazu Masujima
ADBI-JFSA-OECD Roundtable
on Insurance and Retirement Savings in Asia

Photo
H4.8×W4.21cm
tel. +81 3 5220 1812 masakazu.masujima@mhmjapan.com
Masakazu Masujima, Partner
1
Masakazu Masujima
Partner
admitted in Japan, 2001; New York,
2007
with Wilson Sonsini Goodrich &
Rosati, P.C. (2006-2007)
with the Financial Services Agency
(May 2010- June 2012)
Research Fellow for Nikkei CSIS
Virtual Think Tank (2011-2013)
Council member for Ministry of
Economics, Trade and Industry
(2013-present)
Office: Tokyo
Education: The University of Tokyo (LL.B., 2000)
Columbia University School of Law (LL.M., 2006)
Practice Areas: Financial Regulations, M&A and Private Equity
Practice and Experience:
• Advises insurers and other financial institutions on M&A and intra-group restructurings, including:
 Acquisition of PCI Life by SBI Holdings
 Acquisition of Endurance by SOMPO
 Divestiture of Fuji Life by AIG
 Group reorganization by Daiichi Life
 Group reorganization by Aflac
 Other acquisitions involving banks and insurers
• Advises G-SIBs and G-SIIs on corporate governance and regulatory matters.
• External counsel to International Monetary Fund (insurance resolution regime ).
• Advises a number of private equity firms on fund formation (raising +JPY100BL)and asset
management.
• Chambers Asia, Best Lawyers in their Field (Insurance) (2015-2018):
“As a former secondee at Japan's Financial Services Agency, Masakazu Masujima "knows how
the regulator thinks," and as such, insurer clients "can really rely on his experience and knowledge
of Japanese regulations." He is acclaimed as a "very responsive and accommodating" practitioner,
who impresses in dealing with complex issues quickly.”
MORI HAMADA & MATSUMOTO

Japan’s Journey for Fintech
Fintech landscape in Japan
2011 2013 2014
Reward based
crowdfunding
launched
Equity based
crowdfunding
study group
Mt. Gox
crypto hack
Equity based
crowdfunding
law passes
2015
Great East Japan
Earthquake
Fintech buzzes
Blockchain
buzzes
2016
Crypto
regulation
passes
2017
Bank API
regulation
passes
Insurtech
buzzes
2018
US JOBS Act FATF guidance
on crypto
NY Bitlicense Act
EU PSD II
Coincheck
crypto hack
Connected
industry
strategy
released
 Over the years, Japan has carefully watched what are happening overseas and tried to keep pace
with global regulatory trends
 On a crypto space, Japan tries to take the lead in making a rule in the brief that cryptocurrency is
the next big thing.
 As world’s second largest in life insurance market and fifth largest in P&C insurance market, Japan
need to keep up with business model changes for IoE era in insurance space
Regulatory
sandbox law
Singapore
regulatory sandbox

Narrative development persuading insurance industry to give its full attention
to insurtech was the first challenge in 2016 - 2017
Japan’s challenges for insurtech
？
？？
“What has happened in
media/contents business in recent
20 years is the future of financial
business because both of the
media/contents business and the
financial business share the base
model as information industry under
the internet architecture”

<Banking industry disruption map>
Account
Payment
Lending
Collection
Asset Management
Distribution
Asset
Management
Collection
Lending
Payment
Account
Bank account as platform
Marketing Marketing Marketing Marketing
Payment Morgage
Investme
nt
Informati
on
Insurance
Consume
r Loan
Aggregati
on
Other
contents
unbundling
rebundling
Disruption usually takes “unbundling, then rebundling” path
“Learning from the banking industry disruption” was one of the successful
approaches to make the insurance industry aware of a need for innovation

<Insurance case>
rebundling
Distribution
Underwriting
Claims handling
Asset management
Claims
Underwriting
Distribution
Asset
Management
Distribution Distribution
Underwriting Underwriting
Claims Claims
Asset
Management
Asset
Management
unbundling
？
No difference between banking business and insurance business in
terms of industry-wide regulation and full stack services model

As Internet of Everything evolves, people will voluntarily share real-time data
with insurers and let PDSs monitor their own behavior 24/7
Underwriter Underwriter Underwriter Monitoring Monitoring
Reinsurer as a platformer
Monitoring
Risk market

Future of insurance business model is based on layer architecture and
more tech/data driven by making full use of sensors strewed everywhere
Future of insurance business
Front
end
Back
end
Monitoring
Underwriting
Distribution
Compliance
(fraud detection, reporting, risk
management…)
Claims handling
Payment
(premiums, benefits)
 Disruption model
 User driven data management
 Reinsurer as global capital provider
 Small insurer as local risk
management provider
 Distributer as user interface
provider connecting insurer with
commission
On demand
(real time)
P2P
Decentralized
Aggregation
(PDS)
Regtech
Robotic process
automation
Data analytics
Money
remittance
 Business SaaS model
 Analyzing business process big data
for more efficient operations
 Connecting data with regulator for
efficient monitoring/supervision
 Open risk capital market
 Faster and smaller-sized payment
services (arguably not by banks)

Change of regulations and conventional practices in a timely manner are
the biggest concern to take the lead in insurtech space
Regulatory agenda to encourage insurance innovation
 Scope of business for Insurance group (insurance business definition)
 Where exactly is the space that insurance regulation should cover?
 What are the businesses an insurance group is permitted to engage in? Is limitation of business
scope for insurance group really necessary?
 Does a “provision of services rather than money in case of an accident” model really fit for
insurance regulation package?
 How, or whether or not, should we make risk pooling and risk personalization co-exist? How we
should address people who cannot afford insurance protection?
 Product development and supervision
 Data driven parametric insurance
 Dynamic pricing insurance
 Experimental insurance product for data collection
 Reform of supervisor’s review process in product development
 Reform of industry wide closed insurance data sharing process using old-fashioned data
collection and analytics methods
 Enhanced (real-time and large volume) data sharing system to tackle fraud detection
 User-first insurance distribution reform
 Reform of channel-based distribution regulation that unequally protects specific business model
 Reform of insurance broker regulation
 Improve agency management system to promote multichannel sales approach that provides
customers with a seamless risk management experience through offline and online.

Japan’s all industry sandbox legislation aims for collecting data that
backs a need for regulatory reform
Regulatory agenda to encourage insurance innovation
Prime Minister
(Develop “core principles” for sandbox system)
Appointment of
professionals in
each field
Validation
Committee
Private
sector
service
providers
Application of plan
One stop
check in
office
Responsible
Ministers
(Collaboration with
minister responsible
for applicant’s
existing business and
minister responsible
for area of new
business)
Hearing
Recommendation
Request reporting
Accreditation of plan
 Not limited to financial industry due to boundary-blurring nature of innovation.
 Controlling the social impact by limiting numbers of customers involved and the time period.
 Validation committee members from private sector to put pressure on conservative responsible
ministries and make the plan move forward.
 Government officials may unload responsibility for unexpected outcome from the experiments
 Responsible ministers are expected to appoint the senior management who is responsible for
making the process move forward (through personnel rating system managed by the Cabinet)

Thank you !
Masakazu Masujima
Partner, Mori Hamada & Matsumoto
tel. 03.5220.1812
email. masakazu.masujima@mhmjapan.com

[OECD roundtable] japan insurtech challenges

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