What Aspects of the
Insurance Industry Will Be
Changed by FinTech?
Financial innovations engendered byartificial intelligence (AI) and Big Data

By Hideki Fujii & Tadao Matsumoto

Public Interest Incorporated Foundation

Oriental Life Insurance Cultural Development CenterTokyo, Japan

「FinTech は保険業界の「何」を変えるのか？」英語版出版に寄せて
今回このような機会を公益財団法人アジア生命保険振興センターより頂き大変光栄です。財団の皆さんに改めて御礼申し上げます。
現在は、テクノロジーの進歩があまりに早く、テクノロジーを活用した変革は業界を問わず行われていますが、日本の保険業界ではまだまだ、対応は不十分と言える状況だと考えています。詳細は本編に譲りますが、主な論点として特に、メインフレームを中心として巨大かつ複雑なシステムがその障害の一つです。更にもうひとつあるとすれば、長い保険業界の歴史の中で、硬直化した日本の保険業界の変化を受け入れる事に対する保守性に原因があると言えるかと思います。今回、日本の状況を世界に向けて発信することで、他の国からのアイデアやフィードバックを頂けるとしたら、保険業界に色々な形で携わってきた私としては、非常に嬉しく考えております。
思えば、私は保険業界に色々な形（保険会社の人間として、或いは経営コンサルタントとして）で携わって参りました。その間、色々な経験をし、使わせて頂いた予算は 3 桁億円になるといっても過言ではないです。残念ながら、私が携わったプロジェクト全てが成功した訳ではないです。保険業界は多額の投資を私にして、私を育ててくれたと考えており、私は業界全体に残りのキャリアで恩返しをしていきたいと考えて日々、色々な挑戦を続けております。
書籍の中でも取り上げていますが、業界全体の仕組みのプラットフォーム化（特に競争をする必要が無い手続きの領域）は業界全体の効率を上げていく一つの施策であり、サービスを受ける顧客から考えても嬉しいことしかないテーマです。このテーマは単独の保険会社が対応できない構造的な課題であり、業界全体を結束させるリーダーシップが必要だと考えています。私が経営している会社では、この複雑かつ利権が絡む問題を解決するには、経営理念を持って望むしか無いと考えております。詳しくは書籍を確認して頂けると幸いですが、本当の意味で顧客志向で業界から尊敬を得る存在とならない限り不可能であり、業界のリーダーの皆さんから考えて頂きたいと思っております。
当社の挑戦についても、ご確認頂き世界の皆さんから賛同頂けるようなら筆者冥利につきます。

1

最後に、私が日本の保険業界にメッセージとして伝えていますガンジーの言葉を“Be the change you want to see in the world”
見たいと思う世界の変化にあなた自身がなりなさい

パクテラコンサルティングジャパン
代表取締役社長
藤井 秀樹

2

On the occasion of publishing the English language version of What
Aspects of the Insurance Industry Will Be Changed by FinTech?
I would like to thank Oriental Life Insurance Cultural Development Center
today for giving me an opportunity to present at an honorary occasion. I would
like to thank everyone in the foundation sincerely.
The rapid development of technology in recent years has revolutionizedcompanies in various fields; however, the Japanese insurance industry still has
plenty of room for development. There are multiple reasons that contribute to
the complication of the problem, but one of the main problems is that thefoundation of the system lies on a tangled plus large system that the insurancecompany has implemented when it first originated in Japan. In addition to thisproblem, the insurance field in Japan has been protective of the establishedmethod thus made it difficult to revolutionize accordingly. Throughout thisevent, we will be able to present the Japanese insurance situation to different
nations, where constructive criticism and approaches can be made, which willdevelop the Japanese insurance industry. As a person who has been part of theinsurance industry for a long time, I am delighted with this opportunity.
Reflecting in my past, I have been part of the insurance industry innumerous opportunities (as an employee at an insurance company,
management consultant for insurance firm). Throughout this opportunity, I
have handled multiple insurance cases, resulting with more than 10 billion yen
in budget. Unfortunately, though not all the projects I have been part of havebeen a complete success. With all the investment that the insurance industry
devoted to my career, I would like to return the favor, by investing myremaining career into revolutionizing the insurance industry.
The proposed plan is written in the book but, the establishment of aplatform in the whole insurance industry will create efficiency throughout thewhole service and the clients will be introduced to an effortless system.
Currently, the insurance companies are competing upon the registration service,
which should be completely erased with the establishment of a platform. In
order to place the platform, we need the contribution of the entire insurance
industry, thus requiring a dominant leadership. At my company, when we deal3

with complicated issues, employees are reminded with the vision that thecompany has, since this will shape the perspective that the clients have for us.
To remain at the leadership position, we need respect and trust from our clients,
and we will provide the best solution to revolutionize the whole industry. We
appreciate all the clients and everyone who has helped us on the journey torevolutionize the industry and read the book I have written.
Lastly, I would like to leave a message to the Japanese insurance industry
with the quote from Gandhi.
“Be the change you want to see in the world”

Hideki Fujii
President & Chief Executive Officer
Pactera Consulting Japan4

この度、有難くも公益財団法人アジア生命保険振興センターよりこのような機会を頂戴いたしました。大変光栄であり、身の引き締まる思いでございます。
はじめに、今回の翻訳・出版に携わっていただいたすべての方に感謝申し上げます。
「Fintech」に関連するサービスは本書を執筆した約 2 年前と比較して格段に多くなり、エンドユーザーとして具体的な価値を享受できるまでになりました。
また、当社としても、Fintech を活用した新たな決済サービスの立ち上げ等、
Fintech 関連のプロジェクトに携わっており、今後も当領域のコンサルティング
ニーズは拡大していくと期待しています。
その点、Fintech を活用した日本の保険業界の変革というのはまだまだ進んでおらず、その分今後の変革の余地は大きいといえます。保険業界におけるデジタル技術の活用と革新が進むことで、エンドユーザーが享受する価値は格段に高まります。そのうえで、保険会社各社が守るべきデータとその責任も大きくなります。
「デジタル技術による顧客提供価値の拡大」と、「セキュリティ技術による守るべき情報の保護」の両輪を実現することの重要性について、読者の皆さんに伝われば幸いです。それを実現するためのパートナーとして、当社も更に成長していきたいと考えております。

デジタルアーツコンサルティング株式会社
代表取締役社長
松本 忠雄

5

I would like to thank Oriental Life Insurance Cultural Development Centerfor giving me this kind of opportunity. It is an honorary experience andmotivates me to excel in my future works. I would also like to thank the
publisher and the translator who have been part of the process as well.
First, I would like to point out that the number of books and articles on
FinTech has been increasing in the past two years, which suggests that the end
users are willing to learn the precise details and the value of the technology.
Our company has been utilizing the latest FinTech in payment services as wellas participating in the latest FinTech projects, and it is likely that our
corporation will grow in this field.
Although we have been managing FinTech for a while now, the JapaneseInsurance industry has not dealt with much change yet, which implies that it isopen for a revolutionary growth. With the digitalization of the insurance
industry, the end user will be obtaining more valuable information than before.
However, the growth of technology implies that the insurance companies willneed to tighten control of their client’s information.
With this book, I would like to inform the readers that “Digitalization will
grant clients to access valuable information” and “With Security technology,
valuable information will be encrypted”. Our company will strive to achieve
the future where FinTech is fully adopted in the insurance field, and provide an
excellent partnership for our clients.

Tadao Matsumoto
CEO
Digital Arts Consulting Inc.

6

Foreword
For readers who aspire to become world-changing consultants
Nothing beats the insurance industry for sheer excitement!!
Are you familiar with the term FinTech?
It is a portmanteau formed by combining the words finance and technology.
If you break this down further, however, you get the following:
FinTech = Finance x [Big Data + Artificial Intelligence (AI)]The exponential expansion of server capacity has enabled huge amounts ofvery complex data to be amassed and analyzed. This is what is meant by Big
Data. By combining this with artificial intelligence (AI), which consists in partof multi-layered neural networks, computers are now able to essentiallyemulate human beings in their way to learn from past examples and make theirown judgements accordingly.
What sort of chemical reactions will occur when computer technology islinked with finance?
The world will change. This is what I truly believe.
This is because finance is the lifeblood of every economic activity being
carried out in the world today. No economy would exist without finance. The
economy, in turn, constitutes life itself for each one of us and is more or lessconnected to the entire globe. For example, when the financial crisis
originating in the United States with the Lehman Shock occurred, financial
markets around the world as well as economic activities themselves underwent
significant stagnation.
Finance is integrated with computer technology in such a way that we areseeing the nascent beginnings of a new financial domain known as FinTech. It
goes without saying that this development is spreading not just within Japanbut also worldwide to affect an inexhaustibly large number of fields, including
social lending (services that facilitate online intermediation for the lending andborrowing of money), cryptocurrency, personal finance management (PFM),
crowd-funding, robot advisors, and payment and settlement functions. As one
Foreword 7

of these fields, insurance is set to change significantly in the years to come.
While the particulars of this statement will also be explored later in thisbook, it is enough for the moment to say that no field is as untouched by
FinTech as insurance. This is because any attempt to introduce FinTech to thisindustry will be met head-on by very fierce forces of resistance.
Core systems that are deeply tied to insurance-related clerical work utilizeelements of design that are old that it would be appropriate to describe theseelements in legacy terms. If we were to incorporate FinTech into these oldsystems, clerical work would become instantly streamlined and management
costs would be dramatically reduced. However, these old systems remain in
use in a coddled state.
This is not because there is a sense that change would be wasteful andreckless. Instead, this situation can be primarily explained by the fact that the
adoption of FinTech would engender massive changes to existingorganizations, frameworks, operations, and systems and there are large
numbers of people who still feel hesitant about what these changes might entail.
Thus, it is not possible to have this current state of affairs significantly
altered by just those who are on the inside of the insurance industry. Therefore,
consultants and third parties are required to solve the problem.
At present, I am seeking to challenge myself by introducing FinTech to theworld of insurance and transform not just the core systems, but also sales,
marketing, and other related areas. Success in this endeavor will haveenormous economic effects.
According to FY2015 National Field Survey on Life Insurance conductedby the Japan Institute of Life Insurance, nearly 90 percent of Japanese people
have taken out life insurance policies as a household. While you might thinkthat the market is nearly saturated and that it is inconceivable that there ismuch more room to earn further substantial sums of revenue in the future, thisis simply not the case. The adoption of FinTech will help eliminate thewastefulness of past practices and thereby generate exceedingly substantial
earnings.
In contrast to banks that are no longer able to accrue earnings due to theexistence of negative interest rates and securities firms whose earnings havebecome considerably unstable due to fluctuating share prices, the insurance8

industry still has room to generate substantial earnings on a stable basis.
If this is something that cannot be described as a business opportunity, howthen should it be described? It would not be an overstatement that the case tosuggest that the FinTech revolution is emerging for the sake of the insurance
industry. Nothing could make us happier as professionals than to know that we
as management consultants can play an active part in this revolution.
For this book, I teamed up with co-author Tadao Matsumoto, CEO of
Digital Arts Consulting, to talk about work, ways of engaging in work, dreams,
and other such topics and explore, from multiple angles, how we might goabout changing the world by harnessing the key focus of our business:insurance and FinTech.
If you are the sort of person who wants to try doing something new, there is
no doubt that you will enjoy what we are attempting to accomplish in our epic
project. Won’t you join us in changing the world?
Hideki Fujii
President & Chief Executive Officer
Pactera Consulting Japan Co., Ltd.

Foreword 9

10Table of contents
Foreword For readers who aspire to become world-changing consultants ....... 7
Nothing beats the insurance industry for sheer excitement!! ........................ 7
Introduction Digital society and the insurance business ......................... 15
Every type of information in the world is undergoing digitalization... 15
Streamlining achieved through digitalization ...................................... 16
The two streams of financial digitalization ......................................... 17
Digitalization and platforms ................................................................ 19
What constitutes high value-added services in a digital society? ........ 21
Chapter 1 The unknown other side of the insurance industry................. 23
Do you know your own insurance agent? ........................................... 23
Structural issues affecting the selling of insurance.............................. 25
Awareness of marketing is lacking in the insurance industry as awhole! .................................................................................................. 28
A system that has not changed for over five decades is on the brink ofcollapse. .............................................................................................. 29
I can’t receive my insurance money!? ................................................. 30
Numerous complications caused by changes to sales channels ........... 33
Emergence of a new approach as seen in the online selling of insurance............................................................................................................. 35
Limits to online life insurers................................................................ 37
The rising power of independent agencies .......................................... 40
A huge turning point ushered in by amendments to the Insurance
Business Act ........................................................................................ 42
Optimizing the way in which commissions are disclosed and sales areundertaken ........................................................................................... 43
The end of the selling of insurance at the convenience of agencies .... 45
Chapter 2 FinTech will save the insurance industry ............................... 46
FinTech has arrived! ............................................................................ 46
FinTech will knock the bottom out of the established business model 47
Online life insurers are not the same thing as FinTech........................ 48
The concept of a unified platform for the insurance industry.............. 50
Begin by linking the data of all insurance companies together ........... 51
Strong leadership is what is needed to achieve success....................... 53
Will FinTech increase the ranks of the unemployed?.......................... 54
The possibility of combining FinTech with the insurance industry as
can be seen in past examples ............................................................... 56

Table of contents 11

Chapter 3 How will AI change insurance? ............................................. 60
The third-generation AI boom as made possible by deep learning ..... 60
What functions will be replaced by AI? .............................................. 62
Big Data will cause the insurance industry to undergo major reforms 63
The emergence of Big Data will change the way insurance is sold .... 65
Will consulting companies take the initiative in selling insurance!? ... 66
To what extent will AI-driven automation occur? ............................... 67
Insurance premiums will also go down thanks to AI .......................... 70
From sales with a personal touch to sales entailing the ascertainment oflife plans .............................................................................................. 72
Value proposals that can be made precisely because they are made byhuman beings ....................................................................................... 73
Chapter 4 How digitalization will change the links between insurance
and clients ................................................................................................ 75
An insurance industry that is finally facing a turning point ................ 75
A reality characterized by more and more insurance options and risingpremium revenue ................................................................................. 76
Understanding existing policyholders is a point of departure in digitalmarketing ............................................................................................. 78
What exactly is digital marketing? ...................................................... 79
A new way of acquiring clients through the use of FinTech ............... 82
FinTech is essential for ascertaining the needs of current policyholders............................................................................................................. 84
Improving maintenance operations through digital marketing ............ 86
Transforming potential clients into actual clients through linkage with a
DMP .................................................................................................... 87
Sales can be streamlined with digital marketing ................................. 90
The benefits of digital marketing as seen from the perspective of clients............................................................................................................. 92
Using FinTech to also expand services beyond the scope of insurance
products ............................................................................................... 93
The leading edge of insurance sales is an area that is undergoing hugechanges due to the adoption of robot advisors..................................... 94
Chapter 5 Aiming to develop a secure IT platform ................................ 96
An era in which information leaks are directly tied to management
crises .................................................................................................... 96
This is how information leaks occur.................................................... 99
The latest security measures for preventing information leaks ......... 102
Will the IoT lead to information leaks!?............................................ 104
Heightened security measures made possible by the evolution of AI 105
12

Security measures in the insurance industry...................................... 106
The risks of sales channel changes and information leaks ................ 107
The possibilities of cyber insurance .................................................. 111
Dialog 1
How digitalization will change the future and the way we work ................... 114
What going paperless will mean to business ..................................... 115
How people work in a digital society ................................................ 118
Human power that is demanded precisely because our society is adigital one .......................................................................................... 123
Digital marketing is an example of a word-of-mouth culture ........... 127
Dialog 2
New trends in FinTech. What kind of consultant will significantly change theinsurance industry? ........................................................................................ 130
Theme / Background of both authors
This is how we defined our own place in the consulting industry. ............. 131
Personal interactions are important in developing a workforce of
winners .............................................................................................. 131
The difficulties and joys of dealing with an organization (as related bya CEO who stepped down from his position out of weariness at seeing
eighty percent of his work consumed by meetings) .......................... 133
Theme / Changing jobs
Changing companies is not the same thing as changing jobs. Find a job andchange jobs in order to customize your own career. ................................. 134
Is changing jobs in the consulting industry the same thing as apersonnel shuffle?.............................................................................. 134
Consultancy can be likened to a business managing televisionpersonalities in that a job change in this field will give you moreleverage for opening up paths............................................................ 135
An intense desire to run a business is necessary in carrying out theduties of a company president ........................................................... 136
Theme / The joy of working
How should we face our work?.................................................................. 138
Wanting to create an organization in which people can be excited about
working under a philosophy of knowledge, fondness, and enjoyment138
The joy of working comes from love and money! ............................ 139
Converting one’s circle of colleagues with whom relationships havebeen formed through projects into a significant asset ....................... 141

Table of contents 13

Theme / How to overcome setbacks and barriers
What skills are needed to resolve significant issues? ................................ 142
When a project costing several tens of billions of yen is postponed oraborted prior to completion ............................................................... 142
What is important is determining how you can offer added value that
only you can provide ......................................................................... 144
Theme / About projects in which we are currently engaged
Why are we currently focused on the idea of combining FinTech with theinsurance industry? ................................................................................... 145
Two highly specialized companies form a team in hopes of changing
traditional society .............................................................................. 145
Theme / With what kinds of people would you like to work?
People who can engage in exciting work and those who cannot. .............. 147
Those who can survive in the future will be those who can create jobs
that do not currently exist .................................................................. 147

14

Introduction
Digital society and the insurance business
Every type of information in the world is undergoing digitalization
What is the first thing you think of when you hear the word digital?
Watches and music are probably what comes to mind first and foremost for
those who lived through the time of transition from analog to digital.
Watches went from being analog items based on mechanical workings todigital pieces of electronically-structured equipment.
Music went from consisting of analog records to electronic media in theform of compact discs.
Speaking of music media, the downloading of content is now a mainstreammeans of acquiring music; even compact discs are becoming a relic of old
media.
Thus, digitalization refers to the process of converting all forms of information
being handled in the world today into digital signals.
Human beings are organisms that adapt to the environment in which theyfind themselves. While many people are probably not aware of it, this situation
is something that could not have been imagined previously.
For example, try to recall how things were three decades ago in the 1980s.
While networks as the predecessors of the Internet were being operated on ahighly limited experimental basis, they were not yet commercially available.
The Internet was first introduced commercially to the public in the UnitedStates in the latter half of the 1980s.
How did people work back then?
Employees’ attendance was managed with the use of time cards and time
recorders. You would insert a paper time card into a slot of the time recorder tohave the time at which you either arrived at or left work stamped onto it.
People in charge of human resources at that time would look over each time
card for the entire work force of the company and calculate overtime as well as
pension contribution amounts and social insurance premiums.
As long as a given employee remained with the company, all of his or her
past time cards would have had to be stored somewhere. Since a time card was
Introduction 15

replaced with a new one each month, the bigger the workforce, the greater theconcern such as securing a place where the cards can be kept.
The same thing can also be said about written contracts and various othertypes of written documents.
There were vast amounts of paper items referred to as documents, including
documents relating to labor agreements concluded by the company and each
employee, written contracts concluded by and between companies, lists ofactual and potential clients, and presentation materials produced in order toobtain new contract signings. When you realize that these types of documents
also needed to be stored somewhere, it becomes clear that difficulties on aphysical level would emerge under these circumstances.
In addition, these vast amounts of documents were all prepared or filled out
by hand. Workers with neat handwriting might have been tasked with only
making clean copies of documents, while others who were good with theirhands might have been assigned only to jobs involving the drawing of graphs
and figures as part of the production of presentation materials.
Documents and presentation materials prepared in this way were all carriedby hand and exchanged through direct face-to-face interactions withrepresentatives of clients, vendors, and suppliers.
The task of simply creating a one-page document and submitting it to a
supplier or client took a very long time and a lot of trouble to complete.
Streamlining achieved through digitalization
In contrast, how can the present be described?
While there is no doubt that there exist some companies that continue to
track and manage employee attendance with the use of time cards and time
recorders, soon enough time cards and time recorders are rendered completely
unnecessary.
By having every employee retain a personal computer and smartphone, itwill be possible to ascertain with data where each employee is at the moment
and what work each employee is performing at all times. Neither paper timecards nor locations for their storage will be needed any longer.
Every type of contract document and client list is being digitalized. Thesedays, contracts and other documents are being exchanged through email.
16

There will be no longer any concerns over the locations where paper
documents are stored or physically carry paper documents from one location toanother. Also rendered superfluous are employees who specialize only infilling out documents with neat handwriting or in preparing presentationmaterials.
By eliminating paper and digitalizing everything, every facet of operations
is streamlined. Companies will be able to store documents efficiently, and also
preparation time and document handling time are reduced.
Since labor efficiency is improved in a digitalized society, concerns overthe instability of labor do in fact emerge.
Many jobs that were essential in the eighties were redundant.
For instance, employees who specialized in drawing up documents withneat handwriting or producing graphs and charts for presentation materials are
no longer needed to carry out such tasks, thanks to the appearance of various
types of computer software that can perform these jobs instead.
If we look to the future, we can expect that this trend will accelerate further,
thanks to the adoption of artificial intelligence in every field of work.
The Industrial Revolution promoted efficiency gains in terms of physicallabor. Artificial intelligence and other forms of digitalization will accelerate
efficiency gains for intellectual labor. Consequently, most forms of clerical
work being performed today will be considered unnecessary. The impact ofdigitalization on the concept of working is exceedingly large.
The two streams of financial digitalization
Allow me to speak with a little more focus on certain topics. As mentioned
briefly in the introduction of this book, digitalization will continue apace evenin the field of finance. FinTech is the embodiment of this trend.
We believe that there are, broadly speaking, two streams of digitalization in
the world of finance.
The first entails the emergence of new financial businesses attributable todigitalization. Social lending schemes to mediate the lending and borrowing ofmoney online is one such example of this stream.
Under the conventional framework of finance, banks and other financial
institutions capable of functioning as financial mediators serve as
Introduction 17

intermediaries. They collect funds from a large cross-section of society,simultaneously screening parties to whom money could be lent, and issuingloans to parties.
In contrast, social lending schemes made possible by FinTech allow
investors who wish to put their money to work to directly issue loans to those
who wish to borrow money.
Service companies that engage in social lending schemes assess the credit
ratings of those who wish to borrow money and provide this information toinvestors. Upon checking a given party’s credit rating, an investor will
determine whether the party is one from whom a return commensurate withrisks to be assumed by the investor can be obtained and provide funds
accordingly.
The role of financial institutions is to function as financial intermediaries.
It is not always going to be the case that money is something that someone
who wants to use it will sufficiently have on hand. At the same time, there arepeople who wish to put extra money that they have on hand to good,meaningful use.
A financial institution is an entity that will serve as an intermediary
between these two types of persons.
A financial institution will lend money that has been deposited with thefinancial institution by the general public to someone constituting the former
and retain money deposited with it by someone constituting the latter bypromising to repay the principal with added interest after the passage of acertain period of time. In lending to someone constituting the former, afinancial institution will naturally have that person promise to repay borrowed
money with added interest after the passage of a certain period of time.
Focus is placed on the creditworthiness of financial institutions serving as
intermediaries in order to ensure that such intermediary functions continue tobe smoothly performed.
Therefore, a financial institution will refrain from lending to a high-risk
would-be borrower in order to maintain its own creditworthiness.
What if we could directly bring lenders and borrowers together bybypassing financial institutions altogether? Is this even possible?
If we had to identify any glaring issue with such a possible arrangement, it
18

can be summed up by asking whether potential lenders are able to properly
assess the credit risks posed by potential borrowers. Financial institutions at thevery least possess the ability to determine the creditworthiness of those towhom they lend money, thanks to their many years of experience.
In other words, this approach is not feasible unless there is a function for
accurately conveying to the lender information on the credit risk posed by aborrower.
In this connection, a solution can finally be found in the emergence of
FinTech.
In a society of digitalization, everything—not just paper-based data—isconverted into digital data. For example, the existence of credit information
associated with a particular individual will render it easy to determine whether
that person has ever been in arrears. Other types of information that will betreated as data for assessing the creditworthiness of that person include
information contained in SNS posts and settlement information provided bysettlement agents and EC operators.
By analyzing such examples of Big Data, a borrower will be subject to acredit examination and rated for the ability to repay amounts borrowed. At thesame time, a lender will compare rating information and provide a loan when
the lender determines that a return commensurate with risks to be taken can beobtained. This is what is meant by social lending.
Social lending can be described as a service for performing lending
functions normally carried out by banks. In this way, we expect to see more
and more services that work by enabling the low-cost use of activities currently
performed by financial institutions. This trend should spread beyond the fieldof lending to affect various other areas, including asset investments and the
management of settlement operations and assets.

Digitalization and platforms
While the segregation of functions normally performed by existing
financial institutions and the provision of new services at low costs are alsopart of the flow of processes associated with FinTech, FinTech will also causesignificant changes to existing financial institutions.
Most conspicuously, the culture of paper will likely disappear. This is
Introduction 19

another substantial development achieved by the digitalization of finance.
As stated earlier, paper documents in a world that is undergoingdigitalization are being rapidly replaced by digital data. Nevertheless, the cultof paper remains deeply rooted in the world of finance, such that one canencounter plenty of cases in which paper documents are exchanged in various
different settings.
For example, procedures for opening an account with an online bank arebecoming increasingly paperless in recent years. If you wish to open an
account with an online bank to take out a home mortgage, however, nopaperless option is available. Instead, you still have to fill out required fields
on a paper form and submit it by post once it has been completed.
The custom of asking for paper documents will continue. This might besomething that is geared to a certain extent towards older clients. For evenonline insurance companies, any materials that are requested will typically bedelivered in paper form several days later.
When a financial institution sells a new product or registers with or notifies
a supervisory authority, paper documents need to be submitted.
The imposition of inconveniences caused by a culture of paper that refuses
to die can still be seen here and there.
While we will go into more details later, an example of this is the continued
use of paper forms for account transfers undertaken when taking out aninsurance policy through an independent agency (an agency which deals withproducts of multiple insurance companies). Indeed, differences in formatting
among insurance companies make it all that much more troublesome for those
who have to fill out these forms.
For instance, let us assume that company A provides ordinary life insurance,company B provides health insurance, and company C provides automobile
insurance. If you select insurance companies offering the most favorable
conditions according to the scope of coverage sought and therefore simply
wish to enroll in plans with different companies, you will need to fill out
required fields on three different account transfer forms. Since the format
differs according to company, you will find yourself additionally required tocarry out troublesome procedures.
Nevertheless, even this sort of scenario will likely become fully digitalized.
If full digitalization is undertaken and the same platform is adopted (operating
20

environment), you should expect to carry out procedures at a single stroke.
What constitutes high value-added services in a digital society?
If digitalization proceeds under these conditions, it should be possible tostreamline operations for companies across various different sections. However,this is not always going to benefit companies.
While rationalization will be occurring, the question of how companies
should absorb surplus workers will naturally arise. This issue is a serious one
that will be affecting not just insurance companies but also many otherenterprises. If more than half of any given office is rendered superfluous, thereis the risk that companies will be laying off large numbers of their employees.
Thus, a company must establish new sections and systems to enable higher
value-added services to be conceived and employees rendered superfluous byrationalization achieved through digitalization to be shifted.
It would certainly help if employees were to do more than simply comply
with company requests to transfer to sections that have been newly establishedin this manner. Employees should be actively taking the initiative to conceiveof new products and services and demonstrating enough enthusiasm to help
establish new sections.
In other words, the way in which each employee works will undergo hugechanges, thanks to digitalization.
Make no mistake, work that can be digitalized will continue to be
automated to eliminate the need for manual labor in such areas. If we look at
the insurance industry, we see that digitalization will be fully applied toreviews conducted for the underwriting and payment of insurance, theprovision of advice for the selection of insurance plans optimized for eachpotential client, and much more.
At the same time, there is also work that cannot be digitalized.
In terms of insurance, we believe that, while it will become possible toemploy AI-based robot advisors to assist with the selecting the insurance
policies. This is an area of work that might not be very conducive to the use ofrobot advisors if more personal client information is to be elicited in the future.
High value-added services in a digital society are a term that refers toservices in areas where such digitalization is difficult to implement very
Introduction 21

effectively. For a business person working in the years to come, the provisionof high value-added services will become an important skill to wield.

22

Chapter 1 The unknown other side of the insurance industry
Do you know your own insurance agent?
We believe that, in all probability, most Japanese have taken out a lifeinsurance policy.
These days, occupational sales arranged through collaborations withcompanies and government offices have seemingly disappeared. Aroundtwenty years ago, however, it was normal to see a typical sales go something
like this: someone graduates from school and joins a company as a new
employee, whereupon he or she would be taken aside and told, “Since you’re
now a working member of society, you ought to take out some life insurance.”
The senior colleague would then recommend an insurance agent he or sheknows, and the new employee would simply sign whatever policy wasreasonably offered.
There were also cases in which, whenever a bank or securities firm wasinvolved, a quid-pro-quo arrangement might be made, whereby an official withthe bank or securities firm would ask an insurance agent to deposit money orpurchase an investment trust. In return, the official would agree to refer new
employees to the insurance agent.
Figure 1 / More than 80% of both men and women areenrolled in life-insurance policies[Life-insurance participation rates]

Enrolled
Male

FemaleNot enrolled

Source: FY2016 “Survey concerning life security matters”, Japan Institute of Life Insurance

Chapter 1 23

Consequently, Japan boasts one of the world’s highest rates of lifeinsurance enrollment in the world. Even now, more than eighty percent of the
population are enrolled in some form of life insurance policy. In fact, if you arereading this book, you have almost certainly purchased some form of lifeinsurance product (whole-life insurance, medical-care insurance, or annuity
insurance) yourself.
While you can see how pervasive life insurance is in Japan, it is also a factthat life-insurance operations have been carried out in a highly sloppy manner.
Many of you, no doubt, understand what we are saying here.
A typical example consists of the scenario we outlined earlier in which
someone is advised by a senior colleague upon joining a company to take out alife-insurance policy. Next thing you know it, that person has concluded acontract for life insurance. If you once found yourself in this position, you
might have been told by the insurance salesperson, “I selected a plan that ismost suitable for you, one that will hardly be onerous at all.”More likely than not, such a statement is at least partly sincere and would
have been spoken out of the goodness of the insurance agent’s heart. Chancesare, however, that you are almost entirely unaware of the details of theinsurance policy in which you are enrolled. You probably have this vague
sense that “oh, if I die, an insurance payment in the amount of thirty million
yen will be paid out. My parents are currently listed as the beneficiaries but I’ll
just have my spouse become the beneficiary when I eventually get married.”
My guess, however, is that there are many details that should be known by
you as a policyholder but about which you are currently clueless. Examples
consist of the following: the exclusions in your policy, whether you are able tocancel prior to the expiration of the insurance term, whether you are able toreceive a surrender value upon cancellation, the timing at which insurancemoney can be received, and whether there are any special provisions that might
apply during hospitalization. There are a surprisingly high number of people
who have taken out insurance policies without having a clear understanding
with respect to most of these key issues.

24Figure 2 / In terms of sales channels, captive agents continue toaccount for approximately 60% of all insurance policy sales[What is the channel through which you took out your insurance policy?]
Captive agentsOther

FY 2015(enrolled between 2010 and 2015)
FY 2003(enrolled between 1998 and 2003)

Source: FY2015 “National Field Survey on Life Insurance”, Japan Institute of Life Insurance

A certain questionnaire-type survey was previously conducted withquestions posed to people who were enrolled in an insurance plan, regardlessof whether that plan was for life insurance or for non-life insurance. One of thequestions asked, “With which insurance company have you taken out
automobile insurance?” If someone is in any way familiar with insurance, you
would think he or she would answer by saying something like “so-and-so NonLife Insurance”. However, many responded by giving the name of a major lifeinsurance company instead.
This illustrates the extent to which so many people have taken out insurance
policies with a passive attitude.
Structural issues affecting the selling of insurance
Why has this state of affairs emerged in this manner?
It is because insurance agents who until now have played a key role in the
selling of insurance policies and especially life-insurance policies strove to sell
their own character before actually selling insurance plans.
If someone is thinking about taking out some insurance, the process ofselling an insurance policy should ideally go as follows: the agent properly
proceeds to ascertain through a question-and-answer process the family
composition of the prospective client and the prospective client’s life plan andother relevant details and then recommends an insurance policy that confers asuitable amount of security in accordance with the provided answers.
Chapter 1 25

Figure 3 / An insurance agent sells insurance policies
through personal relationships
Expected clients of the insurance agent (territory)
Parents

Relatives

ChildrenInsurance agent
Friends

Acquaintances

When selling an insurance policy, however, it is exceedingly difficult tolisten to everything the client wants and carefully explain the contents of theagreement, including with respect to exclusions included in policy provisions
and other parts of the contract. Although this is not impossible to do, the reality
is that there are hardly any insurance agents out there who are thoroughlyfamiliar with the details of the policies they offer.
Thus, rather than sell with a primary emphasis on the specifications of
insurance policies, an insurance agent will draw attention to his or her own
character and come to believe that selling insurance policies through personalconnections is easier. In fact, this way of selling insurance policies became
normalized in the insurance industry after the Second World War.
Unfortunately, however, insurance policies concluded in this way, that is,through an emphasis on the personal connections between policyholders andinsurance agents, could give rise to several issues in terms of the selling of
insurance policies
For instance, let us assume that you are now fifty years old and that you
took out a life-insurance policy in your twenties. Thirty years later, can you saythat you know who is in charge of your life-insurance policy?
It is likely that there are very few cases in which the same person who wasin charge of your policy at the time you enrolled has remained in charge of26

your policy three decades later. Presuming that your case is a typical case, do
you know who is currently in charge of your policy?
Normally, one would not in fact know the answer to this question. Upon
resigning, a given person in charge will try to hand off files to another person
in charge. However, the new person in charge will have no personal connection
whatsoever to the clients of the former person in charge, which means that noeffort will be made to call these clients, let alone pay them a visit at theirhomes. This situation invariably unfolds in this way, since personalconnections are such an integral part of how life insurance is sold.
As a result, the fact that there are many insurance policies that puts inpeople in charge of unknown holders make it a structural issue plaguing in theinsurance industry.
To illustrate, when an insured person is hospitalized and it becomes
necessary to carry out procedures to receive hospitalization benefits, whomshould this person contact?
The original person in charge no longer works at the insurance company,
and the current person in charge is someone you do not know. You try to readthe policy provisions stated in the insurance policy pamphlet but realize that it
is impossible to decipher what is written unless you happen to be a member ofthe insurance industry. You then resign yourself to the fact that you have to callthe insurance company’s service center yourself and take some troublesome
steps to find the answers you are seeking to obtain.
There are even examples of people who end up calling a different insurancecompany when they inquire about the contents of their policies. Over the past
decade in particular, the insurance industry has been undergoing restructuring,such that people in many cases are unable to remember which companies
originally underwrote their policies.
While one should still not have any problems of this sort if a majordomestic insurance company is involved, the reality is that your typicalpolicyholder will have almost no idea of what is going on when it comes to aforeign-affiliated insurance company. We have actually witnessed cases inwhich, even though the insurance policies of foreign insurance company A
differ completely from the insurance policies offered by foreign insurancecompany B, holders of policies underwritten by company A will frequently callcompany B for clarification concerning their policies.

Chapter 1 27

Awareness of marketing is lacking in the insurance industry as a whole!
Much of this tragicomedy is conventionally prevented if an insurancecompany seeks to properly engage in marketing efforts. However, the desire toengage in marketing is largely missing throughout the entire insurance industry.
Insurance companies customarily believe that “marketing is something thatis to be left in discretion of insurance agents.” Each insurance agent has its own
sales territory and will engage in marketing on his or her own within his or her
own territory, such that insurance companies themselves tend to avoid any
involvement in marketing efforts.
Moreover, the marketing that is undertaken by agents is highly removed
from the true essence of marketing. Frankly speaking, an agent will be making
a list of prospective clients upon joining an insurance company. This list will
constitute that agent’s market, and the agent will thereafter be tasked withinteracting with each of these prospective clients and either concluding
contracts with prospective clients with whom contracts can be concluded ornever again interacting with prospective clients who are unlikely to enroll in a
new policy despite whatever substantial efforts might be undertaken by theagent.
Consequently, once an agent converts his or her own prospective clients
into actual clients, there is no longer any advancement made by the agent.
After sales efforts are applied to all people—including relatives and friends—
forcibly listed as prospective clients in the beginning, an agent will remove thenames of persons who are unlikely to sign up for a new policy from his or her
list and try once again to convince all other remaining prospective clients tobecome actual clients. When these steps have been completed, there is nothing
further to do.
A hardworking agent might be able to conclude agreements with up to ahundred clients. It is said that only about three percent of all agents are capableof going beyond this limit.
In other words, most agents quit within a few years. It would be a rare
instance if, after nearly thirty years has passed since you first took out aninsurance policy, the same insurance agent with whom you signed youragreement is still in charge of your file.
Therefore, the number of clients who are not aware of the identity of theperson in charge of their file continues to rise.
28

Is it too harsh to describe insurance companies as organizations that appear
to be least committed to the notion that clients are to be treated with respect?
A system that has not changed for over five decades is on the brink ofcollapse.
Insurance companies are also beset by internal issues; a prime example isthe system where the client information is managed.
The system used by insurance companies is based on the COBOL
programming language, which might be familiar to those with a computer
programming background. As mentioned earlier, COBOL is a legacy
programming language first introduced more than half a century ago in 1959.
This language remains in use by insurance companies.
Insurance companies feel compelled to continue using such an old
programming language because insurance policies are in effect over extremely
long periods of time.
For example, where insurance coverage is in effect until the insured person
dies as in the case of a whole-life insurance policy, the term of the agreement
will be up to 99 years. Since such a system is one that is meant to manage
long-term insurance policies, it would not be out-of-place to see a system fromover fifty years ago still running.
Figure 4 / Three functions desired in the system in use in the insurance industry
Underwriting function
System that assesses theadvisability of selling an
insurance policy that has beencreatedBuilt with COBOL, a legacy
programming language!
Maintenance function
System for maintaining andmanaging policies after they go
into effect(such as with respect to addresschanges, name changes, andpayment-method changes)

Payment function
System for the payment
of insurance money andbenefits

Chapter 1 29

This is becoming a significant issue in the insurance industry. The systems
in use need to be subject to regular maintenance and any new systematicfeature or scheme that comes along must be incorporated into these systems.
Since such old and massive systems are being operated, young engineers
who attempt to undertake maintenance work in recent years are often unable tounderstand ancient code written decades earlier.
The systems in use by insurance companies broadly fulfill three different
functions.
The first is underwriting. This function determines whether or not it would
be advisable to sell an insurance policy that has been created.
The second is the maintenance function, whereby a system is used tomaintain and manage a policy from the time it is put into effect to the time theinsured person dies.
The third is the payment function for the payment of insurance money andbenefits.
The above three functions are basic functions required of the systems in use
by insurance companies. A failure to properly maintain these systems will
impede the day-to-day operations of an insurance company.
Despite the fact that these systems are so important, the state in which
system operations are substantially affected by such factors as an inability tounderstand the underlying code persists.
I can’t receive my insurance money!?
It is a fact that a negative impact is already being felt in practice.
For example, a process known as aggregation is carried out as part of theunderwriting function. This is a risk mechanism utilized by insurancecompanies to control risk by assisting to determine, for any given client, theextent to which risks are acceptable when selling insurance at the time a policy
is underwritten.
In such a case, you will need to call up a name. To illustrate, a certain
insurance company has to determine whether or not an individual by the nameof Fujii is enrolled in another insurance policy by entering the date of birth,phonetic reading of the name of the person, and sex to call up the individual inquestion. In some cases, a completely different individual with the same family
and given names, date of birth, and sex will be found and deemed to be the30same person. In such a scenario, it is not possible to accurately identify thegiven individual.
A significant issue also affects the payment function. In other words, thepayment of insurance money—which is the most essential aspect of
insurance—is also being impeded under the current system.
There are three stakeholders when it comes to life insurance: thepolicyholder, who constitutes the contracting party; the insured person, whoconstitutes the covered party; and the beneficiary, who constitutes the intended
recipient of insurance money.
Typically, the head of a household will be both the policyholder andinsured person, and the spouse will be the beneficiary. If we add other family
members or siblings to this list of stakeholders, client management becomes
more complicated, such that there is a risk that the payment of insurancemoney when the problem that arises cannot be carried out smoothly.
For example, insurance is sometimes used as an inheritance tax measure bywealthy people who possess valuable inherited property. In some such cases,
you might have up to around ten designated beneficiaries, including sons,
grandchildren, and great-grandchildren. When signing such a policy, not all the
relevant details—such as the addresses of beneficiaries—are properly
determined in every case.
To top it off, any change in the address of a beneficiary would never betracked by an insurance company. The current address of a policyholder is an
important detail to be kept in an up-to-date state by an insurance company,
since premiums need to be properly obtained. In contrast, details regarding
beneficiaries are essentially of no concern since an insurance company only
needs to pay them insurance money.
If nothing else, with the system in use today, it is difficult to properly
manage the addresses of and all other pertinent details concerning beneficiaries.
This is also quite disadvantageous for those to whom insurance money ispaid.
If someone were to enroll in an insurance plan without notifying thebeneficiary and soon thereafter dies, what would happen?
Unless a declaration is made by the beneficiary, no procedures for thepayment of insurance money would be undertaken. Moreover, if the beneficiary,
without knowing that he or she has been designated a beneficiary under aninsurance policy, were to move without notifying the insurance company of a
Chapter 1 31

change in his or her address, it is conceivable that the beneficiary would nolonger be able to receive the insurance money to which he or she is entitled insome cases.
Figure 5 / Three stakeholders with respect to life insurance(i) Policyholder(contracting
party)(Example) Father(ii) Insured person(covered party)

Typically, thepolicyholder andthe insured
person are thesame individual.

(Example) Father(iii) Beneficiary(recipient of
insurancemoney)(Example) Mother

If we add otherfamily members
or siblings as
stakeholders,
information
management
suddenly
becomes more
complicated.

In order to help improve this situation to whatever degree possible, it will
be necessary to harness FinTech to make significant changes to the old,
massive systems still in place at and operated by insurance companies.
32

Numerous complications caused by changes to sales channels
Insurance sales channels have undergone huge changes in recent years.
Up until recently, insurance policies were normally sold by captive agents.
To illustrate, an agent belonging to Company A would deal only withinsurance policies offered by Company A. In recent years, however, insurance
policies are increasingly being sold through independent agencies. An
independent agency refers to an insurance agency that deals with the productsof multiple insurance companies.
If you have ever walked around town, you might have noticed signs on
which it is written “Insurance ○○○” or “○○○ Clinic.” These are in reference toindependent agencies.
Their influence is steadily growing. In recent years, independent agencies
collectively known as the Big Four have expanded their network of offices toover a thousand locations nationwide. The ratio of captive agencies toindependent agencies in terms of sales stood at 65% to 35% in 2016. The shareof the market attributable to independent agencies will surely increase
gradually in the years to come.
These changes to sales channels have been causing clients, independentagencies, and insurance companies to encounter new problems unique to eachof these parties.
Figure 6 / Differences between captive agencies and independent agencies
Captive agencies

Independent agencies

Insurance
policies
Sales
company

Sales
company

Each agency deals only withinsurance products offeredby its own company

Each agency deals with insurance
products offered by multiple companies

Only needs to learn
procedures for theseproducts

Very difficult since different procedures
corresponding to the number of products
offered have to be learned

Chapter 1 33

Let us first examine issues from the point of view of clients.
An independent agency can deal with the policies of multiple insurancecompanies if agreements are concluded with these companies.
Incidentally, there are a total of 92 companies— 41 life-insurancecompanies and 51 non-life-insurance companies—engaged in sales activities
within Japan (as of October 3, 2016). Described as the largest collection of
independent agencies in the country, Hoken no Madoguchi is a corporate group
comprising a total of 41 companies— 25 life-insurance companies and 16 nonlife-insurance companies—as of 2016.
If a given individual were to constitute a client who has taken out policies
offered by only a single one of these companies, there would not be much in
the way of difficulties. However, if a given individual were to, for example,
take out a life-insurance policy offered by Company A, medical-care insurance
policy offered by Company B, and annuity insurance policy offered byCompany C, procedures would need to be carried out three times.
Indeed, after the application forms have been completed, required fields inthe transfer forms for the bank accounts from which insurance premiums will
be deducted will need to be entered. The details to be entered are exceedingly
particular. If a given client is to fill out such forms three times, it would impose
a huge burden on him or her at the time these policies are being taken out.
Naturally, the time required to complete the necessary procedures is also
lengthened.
Likewise, this imposes a considerable burden on insurance agencies as well.
Unable to undertake three different types of procedures in one go, theseagencies are seeing an explosive increase in the amount of paperwork they
have to complete. Moreover, since the formats for account transfer forms andother such procedures are not uniform, agencies must learn how to carry out
dozens of different types of procedures.
Many new insurance products are introduced all the time and new
employees are joining the industry. Each time, the methods by which
procedures are to be carried out must be learned from scratch. Bewilderment
arises in the field and many errors of a clerical processing nature actually occur.
In order to keep these errors to a minimum, insurance companies makeavailable instructors to guide salespersons at insurance agencies. A certain
major foreign-affiliated insurance company is said to employ a force of about athousand such instructors of this type alone within Japan. Think for a moment
34

about how much this must cost in labor terms. The cost is certainly enormous.
This is the sort of issue affecting insurance companies as well.
Now then, what do you suppose would happen if no account transfer forms
were procedurally required?
Clients would be alleviated of stress in this respect and insurance agencies
would no longer need to learn dozens of different types of procedures. Withaccount transfer forms, it is easy to make mistakes in filling them out andaffixing seals. If such forms were to be eliminated, insurance companies could
reduce the number of instructors they employ by a significant amount andproduce considerable cost savings.
It is believed that the key to making these benefits a reality likely resides in
FinTech.
Emergence of a new approach as seen in the online selling of insurance
In addition to independent agencies, the selling of insurance online wasregarded as a prospective sales channel for insurance policies.
Figure 7 / Business model for online life insurers
Face-to-face sales in a brick-andmortar sales office

Loading•Personnel costs•Sales office costs•Maintenanceexpenses•Advertising costs,
and more

Online life insurers
With low loading(overhead) incurred,
this business model
enables thelowering of
insurance premiums

Net premium

Lifenet Insurance Company emerged in 2008 as the first example of thissales approach taken in Japan and has grown to the point where its shares are
set to be listed.
Internet-only insurance companies do not necessarily possess brick-andmortar offices as do existing life insurance companies and are also associatedwith small workforces in the minds of observers. After all, they are known as
online companies.
Chapter 1 35

Thus, sales promotional campaigns targeting young families who might
have wanted to take out life insurance policies but who felt that they wereunable to sign agreements due to high premiums were undertaken.
This approach was successful and initially allowed the number ofpolicyholders to grow in leaps and bounds.
If we take a look at the number of life insurance policies underwritten by
Lifenet Insurance Company, we see that there were 5,116 policies as of the endof March 2008. Growth occurred from the following fiscal year as follows.
End of March, fiscal year 2009: 23,506 policies (359.46% year-on-year increase)
End of March, fiscal year 2010: 63,188 policies (168.82% year-on-year increase)
End of March, fiscal year 2011: 118,040 policies (86.81% year-on-year increase)
End of March, fiscal year 2012: 169,312 policies (43.44% year-on-year increase)
End of March, fiscal year 2013: 202,963 policies (19.88% year-on-year increase)
End of March, fiscal year 2014: 215,403 policies (6.13% year-on-year increase)
End of March, fiscal year 2015: 225,534 policies (4.70% year-on-year increase)
What do you think? These numbers have clearly plateaued.
In the beginning, the online selling of policies by insurance companies wasa very novel concept. People who were so-called early adopters, who weresensitive to trends and gathered information on their own, steadily took out
such policies at that time. Thus, astounding triple-digit year-on-year growth
figures were recorded until the end of March in fiscal year 2010. It was at thispoint in time when the rate of growth in terms of the number of policyholders
peaked.
Incidentally, the number of new policyholders as expressed on a time-seriesbasis is as follows:
End of March 2012: 60,725
End of March 2013: 60,685 (0.06% year-on-year decrease)
End of March 2014: 46,237 (23.80% year-on-year decrease)
End of March 2015: 27,982 (39.48% year-on-year decrease)
End of March 2016: 25,150 (10.12% year-on-year decrease)
When Lifenet Insurance Company first appeared on the scene, there were36

many people who readily accepted the concept of providing life-insurance
policies at cheap premium online and took out new policies accordingly. Oncethe pool of early adopters was exhausted, however, we see that further growthceased and that the number of new policyholders plunged.
Limits to online life insurers
So why then did this trend suddenly peak?
In an article posted on the Toyo Keizai Online website on May 23, 2015,
Chairman Haruaki Deguchi of Lifenet Insurance Company explained why hebelieved that the number of new policies was on the decline as follows:“Because persons working for existing life insurance companies were on the
ground and checking on people’s safety back when the Great East Japan
Earthquake struck, the sense that life insurance should be bought from clericalstaffs rather than online sites was heightened.”
This is undoubtedly one of the reasons for the peak of the trend. However,
one can conceive of a number of possible factors behind the incompatibility oflife-insurance products with online sales.
In the first place, there are prospective clients with whom an agreement
cannot be arrived at fully via just the Internet.
Young people may very well be capable of concluding an insurance
agreement online without much in the way of resistance to this idea. In contrast,
once you reach a certain age, the purchase of an expensive product likeinsurance is met by some with resistance to the notion of concluding a contract
only through online channels.
Secondly, it is difficult in particular for Internet-only life-insurancecompanies who have entered the market late to raise their profile.
No matter how much they strive to engage in acts of publicity throughFacebook and Twitter, the information they wish to share with prospective
clients will not spread as long as prospective clients are not seeking to obtainsuch information for themselves.
In this connection, an insurance company employing numerous insurance
agents is capable of engaging in door-to-door sales, an approach that incurs
costs but that nevertheless allows prospective clients to be reached. In fact,
while most insurance agents do not last long since they rely on attaining sales
through personal connections, an insurance company will be able to raise its
Chapter 1 37

profile as long as its sales force is constantly being replenished with new
insurance agents.
The biggest factor behind the plateauing of online insurance companies isthe fact that insurance premiums did not become as cheap as many people were
expecting.
When online insurance companies first appeared on the scene, consumers
felt that insurance premiums must be low since policies were being sold online.
Insurance companies probably harnessed this point as an advantage to theirbusiness model and endeavored to expand their own market share accordingly.
As described above, however, their profile as insurance companies did not
rise much at all. No matter how much Facebook, Twitter, and other examples
of social networking services are utilized, there is a limit to the extent to which
a company’s profile can be raised. Consumers were not aware that thesecompanies could elevate their profile among consumers by simply engaging inmarketing efforts online.
Consequently, these companies were compelled to wage advertising
campaigns via television commercials, newspapers, magazines, and othertraditional media options.
Unfortunately, such an approach to advertising incurs massive costs. Let us
examine the advertising costs incurred by Lifenet Insurance Company as notedin their financial statements:
April 1, 2010, to March 31, 2011: 1.290 billion yen
April 1, 2011, to March 31, 2012: 1.963 billion yen
April 1, 2012, to March 31, 2013: 2.542 billion yen
April 1, 2013, to March 31, 2014: 1.595 billion yen
April 1, 2014, to March 31, 2015: 1.258 billion yen
April 1, 2015, to March 31, 2016: 0.838 billion yen
While advertising expenses did finally decline significantly during the
fiscal term that ended in March 2016, a whopping 2.542 billion yen inadvertising costs was incurred in the fiscal year that ended in March 2013.
As long as such substantial amounts are spent in order to raise a company’s
profile, it will be difficult to offer cheap insurance through low-cost operations
to as many consumers as possible.

38

Figure 8 / Online life insurance incurs a high advertising costs
Face-to-face sales in an office

Loading

Net premium•Personnel costs•Office costs•Maintenance costs•Advertising costs•Sales expenses

Online life insurers•Advertising costs•Sales expenses,
and more

In some cases, theincurrence ofadvertising costs
does not translate toas much of a change
in insurance
premiums as it doeswith face-to-facesales.

Of course, 2.5 billion yen or so in advertising costs can be easily absorbed
if your ordinary revenue is as large as it is for major life insurance companies.
It is, however, a major burden to bear for a company whose operational scale islike that of Lifenet Insurance Company these days. The Lifenet Insurance
Company’s ordinary revenue is 9.387 billion yen for the fiscal term that ended
in March 2016. In contrast, the ordinary revenue of any major domestic life
insurance company reaches several trillion yen per year.
You may think that the lack of physical office space and a workforce of
insurance agents enable low-cost operations and lower premiums, but the
spending of this much money on advertising costs causes this logical edifice tocrumble to the ground.
While it is true that premiums are set lower for policyholders than they are
by major life insurance companies for the same level of coverage under thesame set of conditions, there are cases in which premiums for insurance
policies sold by independent agencies are in fact set to a lower level. Thus, it
can no longer be categorically stated that insurance premiums will be low
because a given policy is being offered by an Internet-only company.
What will become of online insurance companies?
It is likely that the situation will worsen if nothing changes. Thus, abreakthrough will need to be found somewhere. For example, Lifenet
Insurance Company formed a partnership with KDDI1 and introduced a new
1

KDDI is a Japanese major telecommunication provider, which operates a mobile carrier under thebrand name au.
Chapter 1 39

product known as au life insurance in April 2016.
In this way, the fate of online insurance companies will be determined by
the success with which never-before-seen services can be conceived andlaunched through ties formed with enterprises in other industries.
The rising power of independent agencies
As noted earlier, Internet-only insurance companies are suffering fromhaving hit a ceiling both in terms of the amount of policies in force and thenumber of new policyholders. Despite the fact that ours is now an internetdriven society, the selling of insurance products continues to be dominated bya model in which policies are sold through human beings.
Simultaneously, channels for selling polices physically includes different
possible ways. For example, insurance can be exclusively tied to one company
and these agents are known as salesladies. There are also independent agencies
that handle multiple insurance products from different companies. The twodifferent channels account for 65% and 35% of the market in 2016.
Agencies that are exclusively tied to a single company conform to a
traditional method of sales associated with Japanese life-insurance companies.
Insurance agents known as salesladies have been playing a key role insupporting this method over the years.
The first life-insurance company to be founded in Japan was Nittō Hosei
Company, which was granted a license to operate in 1880. The oldest extant
life-insurance company is Meiji Life Insurance Company, which wasestablished in 1881.
Having insurance products sold by salesladies who would peddle insurance
products was a practice that began after the end of the Second World War,when life-insurance companies supposedly offered women who lost theirhusbands on the battlefield an opportunity to work and earn enough to coverliving expenses. Incidentally, there were 229,668 salespersons registered with
the Financial Services Agency in this industry as of the end of March 2016.
At one time, up to 450,000 salesladies were employed in Japan. The
collapse of the bubble economy and an economy that struggled to grow made itdifficult to secure new policyholders and caused the number of salesladies todecline throughout the 1990s. Consequently, their number has fallen to lessthan half of what it was at its peak. Nevertheless, there are still 220,000
40salesladies in the industry today.
Independent agencies, on the other hand are, as mentioned earlier, a type of
insurance agency that handles the insurance policies of two or more companies.
The ban on this sales channel was lifted in 1996, such that it has not beenaround for very long. Its potency, however, is growing with each passing year.
It was indicated above that single-company exclusive agencies andindependent agencies accounted for sixty-five percent and thirty-five percent of
the market, respectively. The likelihood is that this ratio will invert in just a
few years.
The biggest factor behind expectations that the power relationship between
single-company exclusive agencies and independent agencies will invert overthe next several years is the fact that the selling of insurance throughoccupational sales is becoming incredibly difficult.
Previously, one would have expected to see a constant stream of sales
ladies enter a given office, place pamphlets on employees’ desks, and engage
in sales activities. Nowadays though, security measures have been tightened
everywhere, such that occupational sales of this type cannot be undertaken forthe most part.
The leaking of corporate information has become a substantial problem,
one that we will touch on later in the second half of this book. For this reason
alone, the information security system in companies will become increasingly
strict. Under such circumstances, salesladies are becoming increasingly subject
to constraints on their actions, as a result of which single-company exclusive
agencies cannot help but diminish their ability to engage in sales. In particular,
it is possible that the number of new clients will decrease sharply.
What clients require of insurance is also becoming increasingly diversified
and segmentalized. The type of client who takes out an insurance policy toobtain whole-life insurance or other first-sector insurance coverage with adomestic insurance company but takes out insurance policies to obtain
medical-care insurance or other third-sector insurance coverage with a foreignaffiliated insurance company is also increasing in number.
Even if a client who has taken out a life-insurance policy with a singlecompany exclusive agency tied to a domestic company seeks to take out anadditional policy to obtain medical-care insurance coverage, the singlecompany exclusive agency will, despite any desire to recommend a medicalcare insurance policy offered by a foreign-affiliated insurance company, advise
Chapter 1 41

the client that they cannot help the client since they do not offer such a policy.
Naturally, the client’s needs in such a case cannot be satisfied, whichinvariably results in the loss of a sales opportunity. We believe that joint typesof insurance agencies will increase in number for this reason as well.
A huge turning point ushered in by amendments to the Insurance BusinessAct
In May 2016, the revised Insurance Business Act went into effect. This
amended statute will likely constitute a huge turning point for the insurance
industry.
What changed specifically?
The biggest point is the establishment of an obligation to ascertain theintent of each client. Does this mean that insurance companies previously
engaged in sales while ignoring the intent of each client?
While this is a highly subtle matter, we believe that, in most cases,
insurance products are sold after the intent of the client has been verified to acertain degree.
However, since persons in charge of sales at insurance agencies are also
human beings, it would be natural for them to desire to sell insurance productsthat net them as much money in commissions as possible. In this situation, anagency will, after listening to what a client wants, engage in actions that may
not exactly be self-serving but that nevertheless consist of providing
recommendations of insurance products with high commissions for any
number of plausible reasons.
In response, the Financial Services Agency adopted a rule mandating theascertainment of intent, by which a written document capable of proving thatan insurance product was offered according to the ascertained intent of theclient, that the contents thereof were explained properly, and that an insurance
product consistent with the intent of the client was thereby sold must be
retained.
In addition, the Financial Services Agency requires that agencies disclose
commissions earned by agencies for the selling of insurance.
In the case of an investment trust, the commission is paid at the time aclient purchases the investment trust from the financial institution, and the trust
fee is deducted daily as long as the investment trust is held by the client.
42

In contrast, the costs to be borne by the client purchasing an insurance
product were not expressly indicated.
In other words, even if a high-cost insurance product was recommended toa client, there was no way for the client to know if he or she was being made to
pay high commissions.
Agencies, on the other hand, were largely recommending insurance
products for which high commissions could be imposed on clients.
Consequently, the recommending of insurance products that were inconsistent
with the intent of clients by agencies was a widespread practice.
Optimizing the way in which commissions are disclosed and sales areundertaken
The requirement to have such fees disclosed shook up banks in particular.
This was because, with commissions for insurance sold at bank counters nothaving been indicated previously, banks were able to earn large amounts ofcommissions from the selling of savings-based insurance policies especially incomparison with investment trusts and other such products.
What made it possible for insurance to be sold at bank counters was thefinancial Big Bang that was pushed forth by the Hashimoto administration in
1998.
The financial Big Bang ushered in amendments to the Foreign Exchange
Control Act as well as a sudden lowering of previously hard barriers separating
different sectors—banking, securities, and insurance—from one another. One
example of the outcome of this process can be seen in the selling of insurance
products at bank counters.
The passage of a number of statutory amendments paved the way for the
selling of insurance at bank counters from April 2001. While only group credit
life insurance relating to housing loans was handled initially, the handling ofindividual annuity insurance and property accumulation-type insurance policies
was permitted beginning in October 2002. The types of insurance handled atbank counters continued to expand, with single-premium whole-life insurance,
lump-sum endowment insurance, short-term level-payment endowment
insurance, indemnity insurance for individuals, and other types of insurance
policies permitted to be sold from December 2005, and term insurance, levelpayment whole-life insurance, long-term level payment endowment insurance,
Chapter 1 43

medical and nursing-care insurance, automobile insurance, and other types of
insurance policies permitted to be sold from December 2007.
There is a reason why banks came to proactively sell insurance products inthis way.
The banking business is based primarily on loans and deposits. In otherwords, funds received through deposits are loaned to companies andindividuals to generate a profit margin. The collapse of the bubble economy inthe eighties, however, caused Japan to suffer from a long-term deflationary
economy and economic stagnation throughout the nineties and the first decadeof this century. In addition, the capacity of banks to earn a profit from theirloans and deposits business declined precipitously, thanks to super-low interest
rates that have even led to the emergence of today’s negative interest rates.
Of course, this meant that banks had to find other sources of revenue. It was
at just this time that the ban on the selling of investment trusts and insurance
products at bank counters was lifted.
When we look ahead, we can surmise that banks will continue toaggressively promote such commission-based business opportunities.
While we cannot know for how much longer super-low interest rates will
persist, it is unlikely that this state of affairs will simply come to an end
anytime soon.
With respect to banks’ loans and deposits business, the Japanese population
will continue to decline, which means that domestic demand for loans, as seenfrom a macro-economic perspective, will be forced to shrink. No prospects for
significant improvements are in the forecast.
When you think about these matters thusly, banks will likely continue topress forward with the handling of financial instruments, such as investment
trusts and insurance policies, that allow them to earn commissions. Incidentally,
it is said that commission rates for specific insurance products—such as
variable annuity insurance and foreign currency-denominated insurance
plans—actively offered by banks are typically higher than they are forinvestment trusts.
Moreover, the fact that these commission rates are hidden from theperspective of clients is a problem. Given the Financial Services Agency’s
current focus on proactively optimizing the selling of investment trusts, it is
only natural that this is an area in which the Financial Services Agency has
decided to implement drastic measures.
44

The end of the selling of insurance at the convenience of agencies
In this sense, directives issued by the Financial Services Agency to verify
clients’ intent and disclose commissions and fees charged by agencies will
likely help optimize the selling of insurance products. Even more than the
checking of intent, the disclosure of commissions will result in banks and otherinsurance agencies no longer primarily selling insurance products with highcommissions that are to their own benefit and should cause insurance productswith coverage that is, in a very real sense, necessary and appropriate for clientsto be sold instead.
In terms of the optimization of sales, it should also be noted that onsite
examinations are now being conducted by the Financial Services Agency notjust at insurance companies but also at insurance agencies.
Examinations administered to insurance companies by the Financial
Services Agency used to be consistently administered only to insurancecompanies themselves. Their scope, however, will be spreading to also
encompass insurance agencies. In one sense, insurance agencies werepreviously placed under the protection provided by insurance companies,
which served as their shields. An upswelling of criticism from various corners
affect to the effect that products were being sold with an over-emphasis oncommissions emerged to such an extent that the Financial Services Agency
could no longer overlook this issue. We will now see the Financial Services
Agency begin to conduct examinations at insurance agencies directly.
Naturally, there is a need for insurance agencies to prepare for examinations
to be conducted by the Financial Services Agency by, of course, optimizing thesales process as well as by retaining pertinent materials as proof thereof,
properly managing client information, and otherwise constructing a newcompliance framework.
While some insurance agencies have indicated that they believe the sector
will be subject to culling as a result of the latest statutory amendments, clientsshould welcome these amendments for helping reduce cases in which
insurance products with high commissions that are favorable to insurance
agencies continue to be furiously recommended to clients.

Chapter 1 45

Chapter 2 FinTech will save the insurance industry
FinTech has arrived!
These past few years, the term FinTech has become a veritable buzzword (aterm that appears to be important at first glance but is in fact somewhat
ambiguous in terms of its definition and meaning).
As touched on at the beginning of this book, FinTech is a portmanteau thatblends the words finance and technology together. It consists of a new form offinance that is emerging through the incorporation of technologicaldevelopments consisting of artificial intelligence (AI) and Big Data into thearea of finance.
Let us provide a number of simple examples.
If we look at household accounts, we see that people used to diligently savereceipts, record monthly disbursements in detail with a pen and paper notebook,and calculate total amounts of income and spending with a calculator todetermine whether they were in the black or red.
However, we believe that it is quite common for people to lack
perseverance, such that they can suddenly lose the will to continue to maintaintheir household accounts when they lose their receipts or forget to record a day
or two of activities along the way. While other methods of managing
household accounts on a screen based on the use of Excel or other examples of
spreadsheet programs later emerged as alternatives to the paper-based approachto this task, people still had to enter the information themselves, which meantthat they were forced to be assiduous in order to make the task of maintaining
household accounts a habit.
Thanks to FinTech, however, anyone can automatically manage theirincome, spending, assets, and liabilities in maintaining their household
accounts.
Household account platforms linked with banks, security firms, insurancecompanies, asset-management companies, and other such enterprises not only
automatically calculate the aggregate market value of held assets, but also
digitalize amounts stated in receipts photographed using the camera function
included in smartphones for direct incorporation into the expenditure columnof the user’s household accounts.
In addition, analytical tools are also provided to determine average values46

of spending by households with similarly aged members, income levels, andstructure and identify which spending items are higher (or lower) than average.
FinTech will knock the bottom out of the established business modelHousehold accounts are not the only thing that has evolved thanks to
FinTech. Having been the exclusive province of banks to date, loans will also
be possible to make in a manner that bypasses banks.
Under the conventional framework of finance, banks collect money in theform of deposits made by an unspecified large number of people and lend thismoney to companies and other parties that wish to borrow money. In this way,
an equilibrium of supply and demand for money is achieved.
These days, however, online platforms (operating environments) areavailable to match applicants wishing to borrow money with those who would
like to lend money. In some cases, various types of data analysis are performedby the platform to determine and rate the level of borrower safety and risk.
This kind of scheme is known as social lending or crowdfunding.
FinTech has also entered the field of asset management. Traditionally, asset
management was carried out by having a human being assess future economic
conditions and corporate performance and determine which assets to invest inand the amounts to be invested in such assets. In the future, however, robots
will take over the task of making such determinations. These robots will beknown as robot advisors. After details concerning your held assets, household
structure, and risk tolerance are inputted, a robot advisor will calculate optimal
solutions for your asset-management needs.
Household account platforms, social lending, and robot advisors are allrising stars in the FinTech galaxy.
Various other forms of FinTech innovations, such as cryptocurrency basedon the use of blockchain technology (a system for obtaining highly reliableagreements through mutual monitoring with the use of a distributed computing
network) also exist, but they have only just begun to scratch the surface interms of viability for our purposes.
It is true that FinTech is shaking up the existing financial industry to itscore. However, FinTech, which has been garnering much attention in the
public eye, has thus far only rendered conventional financial functions just alittle more intelligent.
Chapter 2 47

This is why innovations linked to FinTech—whether we are talking abouthousehold account platforms, social lending, or robot advisors—cannot beperceived as being powerful enough to at least potentially function asalternatives to modern banks and security firms.
By harnessing FinTech, however, one financial sector certainly possesses
the potential to thoroughly disrupt its business model from its very foundation.
This sector is the world of insurance.
Online life insurers are not the same thing as FinTech
Online life insurance company, whereby insurance policies are sold via theInternet, has been around for about a decade.
The trailblazers for this field consist of Lifenet Insurance Company and
AXA Direct Life Insurance, both of which began sales operations in 2008. This
sector, which began with just two companies that offered online life insurance
products, subsequently became swamped with new entrants. Today, ninecompanies, some but not all of which are online-only, compete ruthlessly forsales of online life-insurance policies.
While such forms of online life insurers could be seen as examples of
FinTech in the sense that they combine Internet technology with the operationsof insurance companies, they all represent nothing more than the replacementof existing insurance companies with the Internet.
When you come right down to it, we are at the level of FinTech 1.0, which
is at the same level as that of online banks and online securities firms.
For online life insurance companies, the lack of offices and salespersons
necessitates contract procedures whereby the client has to directly visit theinsurance company’s website and fill out required fields. While these steps canbe bothersome to clients, the fact that management costs can be kept low
allows for an advantage in the form of premiums cheaper than those of
insurance policies sold through salespersons.
For insurance companies, however, FinTech 1.0 did not offer any sort ofrevolutionary force sufficient to shake up the entire industry. Existing
insurance companies simply did not see it as any kind of credible threat to their
way of doing business.

48

Figure 9 / Life insurance: industry distribution map[Domestic]
T&D Holdings
TaiyoLife Insurance

DaidoLife Insurance

T&D Financial Life Insurance

Fukoku Life InsuranceGroup

Dai-Ichi Life Holdings Group

Fukoku Life Insurance

Dai-IchiLife
Insurance

Fukokushinrai
Life Insurance

Meiji Yasuda
Life Insurance

Sumitomo Life Insurance Group

Dai-Ichi FrontierLife Insurance

SumitomoLife Insurance

Neo First
Life Insurance

NipponLife
Insurance

Sony Financial Holdings
Sony Life Insurance

Japan Post
Insurance

AEGON Sony Life Insurance

MedicareLife Insurance

Mitsui
Life
Insurance

Asahi
MutualLife
Insurance[Foreign affiliated]
Prudential Financial
Prudential Gibraltar Financial Life Insurance(formerly Yamato Life Insurance)
AXA Group

Gibraltar
Life Insurance

Prudential
Life Insurance

FWD Japan Holdings

AXA Life Insurance
FWD Fuji Life Insurance

MetLifeLife Insurance

AXA Direct Life Insurance
NN Life Insurance

MassMutual Life Insurance

Zurich Life Insurance

Manulife Life Insurance

Aflac[Non-life insurance, online, and independent]
SOMPO Holdings

Tokyo Marine Holdings

Sompo Japan Nipponkoa Himawari Life Insurance
Lifenet Insurance
Company

ORIX GroupTokyo Marine Nichido Anshin Life Insurance

ORIX Life Insurance

MS&AD Insurance Group Holdings
Mitsui Sumitomo Aioi Life Insurance

Mitsui Sumitomo Primary Life Insurance

Chapter 2 49

Accordingly, even traditional insurance companies without exception cameto subscribe to the notion of selling insurance via the Internet. If we cut to thechase, we can proclaim that an online life insurance company was not a true
example of FinTech.
However, we aspire to achieve a world in which FinTech is deeplyintertwined with insurance. Such a world should cause the insurance industry
to undergo an evolutionary process that will be revolutionary.
This is probably a project whose implementation is disagreeable to thosemembers of the insurance industry who do not wish to see the status quo
altered. That progress is elusive despite the fact that technology to make thishappen already exists can be explained by the unmistakeable existence ofpeople and parties who would suffer if this project were to bear fruit.
The concept of a unified platform for the insurance industry
So, what are we trying to change in the present?
The answer has already been presented in the preceding chapter: totransition from old systems that are both byzantine and massive to a unified
platform for the insurance industry.
The systems that are currently being used by many insurance companies do
not just differ from one insurance company to another in terms ofspecifications. It is also no easy matter to simply modify some basic
specifications, since a legacy programming language known as COBOL isused by these systems. Programmers capable of understanding COBOL anddealing with these systems can hardly be found these days among the young. If
programmers continue to age, it is possible that we will no longer be able tochange the specifications of these massive, sluggish systems. This, in turn,
could cause instability and rock the management of insurance companies totheir core.
As mentioned above, the systems in use by insurance companies broadly
fulfill three different functions. Let us quickly go over them again.
The first step is underwriting. This function determines whether or not it
would be advisable to sell an insurance policy that has been created. To put it
differently, insurance companies must determine whether it is acceptable toaccept client risks through insurance policies.
The next step is the maintenance function, a function for managing policies.
50

Policies need to be maintained and managed until the client dies or the
insurance policy is terminated. In the case of life insurance in particular, thelong-term nature of the policy means that it is exceedingly important tomaintain and manage policies.
The third step is the payment function for the payment of insurance moneyby the insurance company to clients.
The above three functions are the primary functions of the systems in use
by insurance companies. Not only do the specifications of these systems differ
from one insurance company to the next, but there is even the risk that it might
not be possible to smoothly maintain these systems, given their age andmassive size. It is hoped that the magnitude of the risks posed by these systems
to the management of insurance companies is understood.
Irrespective of the presence of such a huge potential risk, the adoption of a
unified platform is not going smoothly. This is because adoption threatens tocause certain people in the industry to lose their jobs.
There are two types of people in an insurance company. Those who belong
to sales sections or departments will wholeheartedly agree with the adoption ofa unified platform, since it would allow them to streamline their own work. In
contrast, those who belong to system sections or departments will give voice tovarious arguments against adoption. At this point, those who first agreed withadoption will ultimately back down due to their lack of detailed familiarity
with the systems on which their operations rely.
Thus, the adoption of a unified platform is progressing at a snail’s pacedespite being technically feasible.
Begin by linking the data of all insurance companies together
What exactly is meant by a unified platform?
People in charge of product development at insurance companies arealways seeking to create insurance policies that are as good as they can
possibly be. This is the correct stance to take. Nevertheless, office workers
likewise seek to formulate better office procedures.
Creating an identification process that does not burden clients and is easy tounderstand is not bad; however, the identification process differs from one
insurance company to the next. No matter how optimal office procedures may
be, it will simply not be to the benefit of clients if there are as many different
Chapter 2 51

types of procedures as there are insurance companies. If there are 92 insurancecompanies in Japan, there might be a slew of procedures numbering 92
different sets in all. For clients faced with the need to actually undertake all ofthese procedures, this constitutes a huge burden.
What we are proposing is that someone takes the lead in unifying thesystems necessary for different procedures for the insurance industry as awhole. What we are thus talking about is the concept of a unified platform forthe insurance industry.
Figure 10 / Linking data with a unified platform
Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Procedures Procedures Procedures Procedures Procedures Procedures Procedures Procedures Procedures Procedures Procedures

Procedures by different methods

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Insurance

Platform
Just a single set of procedures suffices

The creation of a unified platform given the current state of the insurance
industry is thought to be quite a difficult challenge. As stated earlier, this isbecause of the possibility that objections will be raised.
Therefore, the development of a platform that is truly unified will takesome time.
This does not mean, however, that the option to do nothing can be chosen.
To reiterate yet again, the existing massive COBOL-based system is reaching
its limits. In addition, given the rising power of independent agencies in sales
channels for insurance and the complexity of office procedures, there is a needto create a scheme to enable the submission of insurance enrollment
applications based on a unified format.
In this connection, perhaps it would be a good idea to at least begin by52

establishing connections among data possessed by insurance companies.
Strong leadership is what is needed to achieve successSpecifically speaking, we are talking about a scheme that would allow
client information possessed by each insurance company to be shared withother insurance companies once inputted into a common database.
There is no need to entertain concerns that an insurance company might
have about the advisability of allowing other insurance companies to accessclient information in its possession. This is because client information required
for name identification purposes is already accessible through a database usedby the entire insurance industry.
For example, let us say that Person A visits an insurance agency andindicates that she would like to take out an insurance policy. At this time, thisinsurance agency will look up the state of enrollments at its own insurancecompany and other insurance companies based on the use of nameidentification data in order to verify that Person A has not already taken out asimilar insurance policy in the past.
The process is conducted because there are rules in place that prohibit
taking out insurance policies that aggregates the provided sum over a certain
amount of coverage, or in the case of medical-care insurance, over a certain
amount of daily benefits.
Therefore, name-identification actions based on the name, date of birth,and sex of an individual will be carried out to examine the state of enrollment
in other insurance policies.
Since such a scheme is already being operated, it should not be too difficult
to link the data possessed by different insurance companies. This is the firststep that can be taken toward putting together a unified platform and is seen in
my plan as the most realistic idea that can be presently implemented.
Of course, we would like to eventually see a unified platform become areality. When can we see this happen?
Given the political factors that play a big part in this issue, a unified
platform might be unveiled next year or in five years. Since the technicalelements are already in place, it is now up to the insurance industry to move
forward with a view to seeing a unified platform finally come to pass.
Once a unified platform is launched, it will be possible—as with accountChapter 2 53

transfer forms—to digitalize the clerical documents that used to be subject topaper-based management.
The issue here is that the format of account-transfer forms changes from
one insurance company to another. As long as the format of account-transfer
forms differs according to insurance company, there would be no point inhaving a unified platform.
Incidentally, there are no provisions anywhere that stipulate that accounttransfer forms used by insurance companies should be formatted a certain way.
This state of affairs exists only because each insurance company has processed
their paperwork to date based on the use of their own format and because theprospect of making changes to the status quo is too much trouble. Thus,
someone needs to step up and exercise strong leadership in saying, “Since thiswould be for the benefit of our clients, let’s all sit down and create a common
format.”If insurance companies were to create a common format for accounttransfers and mount it on a unified platform, there would no longer be a needfor account-transfer forms, and the inconvenience attributed to account-transfer
forms that differ in terms of format from one insurance company to another asborne by insurance agencies would be eliminated in one fell swoop.
Will FinTech increase the ranks of the unemployed?
While the advantages of introducing FinTech to the insurance industry canalso be found elsewhere, let us for now contemplate just how serious thematters of concern tied to the adoption of FinTech as expressed by members ofsociety are.
If account-transfer forms are digitalized, you might first wonder what will
become of those who have been dealing with the paperwork for accounttransfer forms up to now.
As with anyone who simply dealt with paperwork in the office that deals
with policy department in insurance companies, their jobs such as giving
guidance to insurance agencies on paperwork and other clerical function are ata risk of losing their jobs.
For example, let us say that there are about a thousand instructors working
for the Japanese subsidiary of a major foreign insurance company. In the eventthat a unified platform is launched, industry observers believe that 30 percent
54

of such employees would be rendered superfluous.
The concern that employees might be displaced by the adoption of FinTech
is not limited just to areas relating to digitalization.
While we will go into this in greater detail later, we will say for now that, in
addition to the digitalization of all sorts of clerical procedures, the use of
artificial intelligence (AI) will attract attention in connection with FinTech.
Briefly put, AI is technology that will draw the most attention in the years
to come. With AI, computers will be able to read various patterns and makedecisions and judgements in a manner similar to what can be achieved with thehuman brain.
The fact is that it is highly likely that AI can function very effectively in thefield of insurance.
If an insurance company were to delegate the sort of decision-making thatused to require human intervention to AI, then manpower needs could decline
significantly in any sections affected by this move.
According to an analytical report issued by the World Economic Forum
held in Davos, Switzerland in January 2016 (commonly referred to simply as“Davos”), the rise of robots and AI will result in the loss of approximately 5.1
million jobs over the next five years in 15 countries and regions worldwide.
As you can expect from the report, there is the risk that the more AI andother aspects of FinTech are adopted, the greater the number of people whowill lose their jobs even in the insurance industry.
Yet, we believe that the spread of FinTech will not necessarily lead to an
immediate increase in the ranks of the unemployed. This is because thepopulation of Japan will rapidly decline.
The Japanese population peaked in 2008, when it stood at approximately
128.08 million people.
However, this country’s population is currently decreasing. According toestimated figures calculated by the National Institute of Population and Social
Security Research, the population will decrease to 124.10 million people in2020 and to 116.618 million people in 2030. In 2050, the population will crossthe 100 million people threshold and decline to 97.076 million people. In 2060,
it is expected to fall below 90 million people to 86.737 million people.
If the population declines, it goes without saying that the size of the labor
force will also shrink rapidly. According to estimated figures provided by the
National Institute of Population and Social Security Research, people between
Chapter 2 55

twenty and sixty-four years of age peaked in terms of population size when thisbracket accounted for 62.7 percent of the total population in 1995. This figure
went down to 56.0 percent in 2015 and is expected to decline to 47.3 percent in
2060.
Since the size of the labor force is shrinking, it will be important todetermine how we can make laborsaving and efficient gains. When the issues
are also seen in terms of these large changes in the social structure, it is clearthat FinTech will be hugely relevant for the insurance industry.
If we are to protect the safety of the core systems in place at insurancecompanies while the population of the country shrinks, we can at least say thatthe task of maintaining the old, massive systems that are currently being usedby insurance companies is a challenging one. Since the ranks of engineers stillfamiliar with COBOL are growing ever thinner as these engineers continue toage, maintenance itself will eventually become very problematic indeed.
The wild card for solving these issues is integration with FinTech. To
elaborate, we even believe that, unless the insurance industry harnesses thepower of FinTech, it will be rendered incapable of dealing with an aging
society beset by a declining birth rate.
What can be done to mitigate the weakening of the Japanese economy in
the face of an aging society and a declining birth rate? This is a huge matterthat must be fully confronted not just by the consulting sector but also by theentire country.
The possibility of combining FinTech with the insurance industry as canbe seen in past examples
As mentioned earlier, FinTech has begun to be utilized in various financial
areas in Japan as well. In addition to household account applications, social
lending functions, robot advisory services, and cryptocurrency, different
financial services are emerging, albeit not yet on a very large scale. As we have
explained thus far, FinTech is also expected to infiltrate the field of insurance
in the years to come.
Overseas, the term InsurTech (which combines insurance with technology)
has been coined to describe the incorporation of FinTech into the area of
insurance. There are also signs that new services will also be unveiled in the
future. Let us take a brief look at how we might see FinTech make gains in the56area of insurance, including with respect to not just life insurance, but also nonlife (damage) insurance.
First, non-life insurance has traditionally consisted primarily of what is
known as risk subdivision-type automobile insurance, whereby the risk that adriver will be involved in an automobile accident is precisely calculated
according to his or her attributes. Specifically, risk is calculated based on thefollowing nine items:
(i)
(ii)
(iii)
(iv)

Age
Sex
Driving history
Whether the automobile is to be used for commercial, personal, orother purposes(v) Yearly distance driven and other conditions of automobile use(vi) Region(vii) Automobile model(viii) Whether the automobile is equipped with safety features(ix) Number of automobiles ownedMore specifically, the younger the driver, the greater the risk that the driverwill drive recklessly and thereby cause an accident. The more kilometers adriver drives in a year, the greater the risk that the driver will be involved in an
accident to the extent that there are more opportunities being taken to drive an
automobile. In this way, statistical data is used to determine the risk that an
accident will be encountered. The premium to be charged will be set
accordingly.
However, since there are also young people who drive carefully, someargue that you cannot paint all young people with the same brush in declaringthat the risk that a young person will get himself or herself involved in an
accident through reckless driving is high. Naturally, if you were to enroll sucha person in a risk subdivision-type automobile insurance policy, it is possiblethat premiums that do not reflect that person’s careful driving style will be set.
In this connection, insurance companies are looking to FinTech andstudying the feasibility of automobile insurance policies for which thepremium would be determined by installing a certain device in the automobile
to be driven. Various types of information—such as information indicating theChapter 2 57

way in which the driver steps on the accelerator and brake and the speed atwhich the automobile is driven—are uploaded to the cloud to enable analysisof the driver’s driving skill, according to which the premium would then be set.
This type of automobile insurance policy is spreading in the West.
With life insurance as well, there are moves to promote the development of
new products and services through the adoption of FinTech.
For example, if a DNA analysis reveals that there is a large risk that aperson will develop a serious illness, premiums can be set to a high level. On
the other hand, if there is a low risk that an individual will suffer from any kindof illness that will incur large medical care expenditures in the future, thenpolicies with insurance premiums that are set low to reflect this knowledge will
likely be offered.
Oscar Health Insurance, a company selling medical-care insurance online in
the United States, sells insurance and also refers specialists operating practices
near the home of each policyholder, manages each policyholder’s history ofprescription medicine and history of house calls made, and facilitates theissuance of prescriptions for generic drugs. This company retains a huge
database of medical services provided to individuals, on the basis of which
various services required for the management of personal health are slated to
be developed and released in the future.
There is also a scheme known as P2P insurance. Also referred to as social
insurance, policyholders all contribute small amounts of funds to a pool ofmoney. In the event that a small amount of insurance money is to be paid, it
will be paid out of this pool of money. Any large amount of insurance money
exceeding a certain threshold determined in advance is to be paid by an outside
insurance company.
P2P means peer to peer. In other words, persons wishing to enroll in an
insurance plan can come together online and engage in cooperative actions
whereby money is mutually contributed. It is fair to say that this concept gives
rise to a business model that could not have come into being without the
emergence of Internet technology.
There are other examples, including micro-insurance policies that can beeasily purchased via one’s smartphone, insurance companies that managed to
improve their bottom line by adopting artificial intelligence for all aspects of
their day-to-day operations, and the ability to undertake all sorts of procedures
required to conclude an insurance policy by voice using voice-authentication
58

technology.
With respect to the means by which personal authentication can be
performed, we have authentication technology based on voice as well as
authentication technology based on fingerprints. There are also developments
aimed at improving security in connection with insurance.
Services based on the use of blockchain technology might also becomecommon in the future. A blockchain is a distributed computing network andconstitutes a system for obtaining highly reliable agreements through mutual
monitoring.
For example, you needed to go through a bank in the past when you wanted
to exchange money. This is because banks were seen as playing a valuable roleas an outside party that both sides in a transaction could trust whenever money
was to be exchanged.
In contrast, blockchains enable the exchange of money directly between
parties despite the absence of a third-party institution like a bank.
Bitcoin and other cryptocurrencies operate based on the use of this scheme.
With Bitcoin, information indicating how many bitcoins are held in whose
wallets is distributed around the world through blockchains. It is truly a very
public system, such that if anyone were to try to use more Bitcoins than he or
she owns, someone else would certainly call foul and prevent that person fromengaging in any further transactions.
While there are no services at present that would allow a client to pay forpremiums with Bitcoin, new services will doubtlessly emerge to allow for thisaction to be taken with Bitcoins and other forms of cryptocurrencies once
cryptocurrency is implemented in the future for commercial applications.

Chapter 2 59

Chapter 3 How will AI change insurance?
The third-generation AI boom as made possible by deep learning
If the impact of FinTech on the insurance industry is to be considered, theexistence of AI is something that cannot be ignored.
AI is short for artificial intelligence. While AI is often associated with
cutting-edge technology, the fact is that artificial intelligence these days
corresponds to the third generation of this phenomenon, which, in turn, meansthat there was a first generation and second generation of AI in the past.
The first generation of AI was launched at a conference held at DartmouthCollege in the United States in 1956. This is when the term artificial
intelligence (AI) was conceived.
The first generation of artificial intelligence was truly simple and wasdeveloped to provide answers through the performance of high school-level
algebraic calculations according to rules determined in advance. In addition,
ELIZA was an AI robot who could converse with human beings. ELIZA wasthe basis for Siri, a voice-based assistant feature included in modern-day
iPhones. However, ELIZA does not actually understand the contents of herconversations. She is merely providing answers thought to be the most suitable,in line with patterns that were given to her ahead of time.
Ultimately, the first generation of artificial intelligence was a far from real
intelligence. The field of AI then settled down to a long winter characterized
by a lack of any real evolution.
The second generation of AI was spearheaded primarily by expert systems
that became widespread between 1980 and 1987.
These expert systems consist of two parts: an inference engine and aknowledge base. The inference engine uses the knowledge base to makeinferences. The knowledge of experts is translated into rules and loaded into
computers. Various problems can be solved according to an approach whereby
the computer will make a certain determination if certain conditions are
satisfied by the observed data.
This remained, however, a far cry from functions essential for theconstitution of real intelligence, whereby a being will consider matters on its
own and generate knowledge accordingly. Thus it was that the second
generation of AI settled down to another winter of stalled progress.
60

The third generation of AI blossomed with deep learning, which emergedin 2010. Deep learning refers to machine-learning algorithms that allow forlearning that approximates what the human brain can accomplish by way ofaugmenting hierarchies of neural networks (an approach to computerized
information processing modeled on neural pathways in human beings).
Figure 11 / Third generation of AI made possible by deep learning● First generation (from around 1956)
Emergence of intelligent computers that operateaccording to given rules. Can play chess and prove
mathematical theorems.
● Second generation (from around 1980)
Determinations can be made by computers known as
expert systems, thanks to an engine for which expert
knowledge has been translated into rules.
● Third generation (from around 2010)
Appearance of deep learning. Highly precise learning
approximating the human brain is possible; calculation
speeds have also improved dramatically.

By achieving this dramatic improvement in computer calculation speeds
and significantly enhancing the environment for the usage of Big Data, thelimits reached by AI up to the second generation, when computers exhibiting
AI were not yet able to think for themselves, were overcome at a stroke.
Numerous practical experiments have been conducted to determine theextent to which third-generation AI excels. Media exposure has allowed theresults of these experiments to become widely known.
There is a computer program named AlphaGo. Developed by Google
DeepMind, this program defeated a top-class professional go player in October
2015.
While IBM’s Deep Blue defeated a world-champion chess player in 1997, it
was felt that it would be much more difficult to defeat a professional go player
due to the far greater number of possible moves than there are in chess.
Chapter 3 61

Nevertheless, the day on which a computer beat a human being at this gamefinally arrived.
This was truly an emblematic event.
We had all been thinking of computers as simply something that could
perform calculations faster than human beings were capable of. None of us
could have imagined that the day would come when computers could
demonstrate the same level of intelligence as we ourselves possess.
What functions will be replaced by AI?
The appearance of third-generation AI, as characterized by computers thatcan learn and make determinations on their own, will probably significantly
change the way we engage in our work.
Even in the insurance industry, which is the focus of this book, the adoptionof AI in the near future will cause everything from back-office operations tosales to undergo dramatic changes.
What sorts of large changes will be visited by AI upon the insurance
industry?
For example, for the underwriting of policyholder risks, there are experts
known as actuaries who calculate, with a command of statistics and other tools,
the probabilities that future uncertain risks, such as death or an accident, will
occur. For operations involving a change of address or name identification,
people who specialize in these areas will be placed in charge of relevant duties.
The question of whether humans will be replaced by AI for the performanceof these operations will be looked at closely in the insurance industry in theyears to come.
People are currently skeptical as to whether such work can be fully
delegated to computers and whether AI has evolved technically to such an
extent that AI can displace the manual labor that has been traditionally carriedout for such operations. Thus, resistance remains strong in the industry.
It is likely, however, that displacement will eventually happen.
In the world of AI, the concept of the singularity argues for the arrival of anage in which technology will evolve with a sudden burst of speed to see thelevel of intelligence demonstrated by AI surpass that of human beings.
In 2045, it is expected that the computing power of a thousand-dollar
personal computer will be ten billion times greater than the human brain. When62

that time comes, the landscape of the world in which we live will undergo a seachange.
It should be noted that such a time is not in the distant future. In 2045, those
who are just embarking on their careers will be in their fifties and working at
the frontlines of their companies. In this sense, there is no doubt that theinsurance industry will see some very interesting business opportunities unfold
due to an expected transformation in the landscape as wrought by artificial
intelligence.
Given these considerations, ongoing developments suggest that we have no
choice but to accept that human beings performing actuarial jobs and various
back office-related jobs will eventually be replaced by artificial intelligence.
Big Data will cause the insurance industry to undergo major reforms
Along with AI, Big Data represents a huge shift in technology, one on
which the insurance industry must focus.
The term Big Data itself has existed for some time now. It is only in thepast few years, however, that this concept has drawn attention. The backdrop
for this is the dissemination of the notion of data mining, which involves thestatistical analysis of large volumes of data, the extraction of frequently
occurring patterns and classes, and the linking of the results of these steps withbuying behavior and marketing.
No matter how much a company is committed to carrying out data mining,nothing will function without essential data. If the amount of source data at thetime that analysis is conducted is low, any frequently occurring patterns thatare extracted will likely lack in universality.
In order to raise, even if only slightly, the precision of the results generated
by data mining, you will first need to collect huge amounts of data fromvarious different sources and amass this data in a large-capacity server. This iswhat is constituted by Big Data.
A high-speed computing system to enable the extraction of frequently
occurring patterns from Big Data will also be needed.
These technologies have finally come together to allow the realization of anenvironment in which Big Data-based data mining can be undertaken withgreater precision. Consequently, interest in Big Data is also rising.

Chapter 3 63

Figure 12 / Data mining based on the use of Big Data

Age

Sex
Healthcondition
Occupation
YearlyincomeAnd more…

Optimalinsurance
policy can beproposed

Big Data
Data mining(analysis)

Artificial intelligence (AI) plays a role!

As with AI, Big Data also has the potential to significantly affect theinsurance industry because these companies that are in possession of massive
amounts of data will be capable of operating an insurance firm.
For example, Rakuten is Japan’s biggest enterprise in the field of ecommerce. They possess massive amounts of customer data corresponding toconsumers who purchase items from Rakuten each day. In addition, thepurchasing history of each customer is fully retained in a database. The
analysis of this example of Big Data allows for the selling of insurance
products offered by Rakuten Life Insurance or the provision of loans to
individuals by Rakuten.
Under these conditions, even a company that operates in a sector thatdiffers completely from finance can enter the world of finance as long as it
possesses huge amounts of customer data. While it goes without saying that
there are issues of permission and authorization to consider, we can at least saythat it is technically feasible, by a large margin, for a company with as muchpersonal information as Rakuten possesses to develop financial business
operations.
In what ways will the insurance industry change when companies that do
not traditionally belong to the insurance industry and that possess large
amounts of customer data and data on purchasing actions that are completely
unfamiliar to insurance companies enter the insurance business?
Of course, existing insurance companies will hardly just sit back and64

passively watch these other companies make a foray into their sector. It is
entirely conceivable that insurance companies will attempt, for now, to sell
insurance products by joining hands with, for example, mail-order companies
that manage the types of data that they themselves do not possess.
The emergence of Big Data will change the way insurance is sold
The use of Big Data will also give rise to significant changes in terms of thecultivation of those who sell insurance products.
Those who have been successful at selling insurance products up to now
have in part achieved this success thanks to their experience and gut feelings.
Their past experience may include examples of methods that they believed
worked in given situations. On the other hand, it is doubtless that those whohave successfully sold insurance products in the past might also have been
unsure about some matters but nevertheless went with their gut instincts, which,in turn, helped produce positive outcomes. As long as positive outcomes are
actually obtained, one can conclude that an action, even one that stems fromintuition, is probabilistically the correct one to take.
The problem comes when it is time to ask what a completely new person
without any experience selling insurance products or an unsuccessful
salesperson who lacks the intuition required for sales can do to sell insurance
products. This is not an issue that is limited to insurance products. It isconceivable that a salesperson with a poor record of sales will have adopted,
over time, an incorrect approach to sales without ever having realized that thisprocess was happening.
This is where the opportunity for using Big Data and AI exists.
In effect, we will impart the knowledge possessed by salespersons withexcellent sales track records to AI. We will then have AI provide sales advice
in terms of the sales method that should be carried out for a given type of client
under given circumstances. If this helps to increase sales, then the cost of
training new salespersons should decline considerably.
Let me convey a story we once heard.
When a certain salesperson was still a fresh rookie, he sought to catch up toa colleague of his who was very successful. To this end, he copied every movemade by a senior salesperson who was the top salesperson in his office.
He copied his senior colleague so well and thoroughly—by doing
Chapter 3 65

everything from reading the same newspapers and journals, watching the same
television programming, arriving at the office at the same time, taking the same
course of action after work, visiting clients and observing how to put on a sales
pitch, and adjusting his manner of speech and the speed at which he spoke tomatch that of his senior colleague—that he might very well have been
described as a clone of the person he was emulating.
Consequently, this salesperson’s efforts bore fruit and he managed to catchup to his senior colleague in terms of sales performance in no time at all.
If the behavioral patterns common to truly successful salespersons weresimilarly converted into Big Data and extracted through data mining, asalesperson would be able to visit a client and engage in sales as if he or she
were accompanied by a top-level salesperson at all times.
Will consulting companies take the initiative in selling insurance!?
In looking at things from a somewhat different perspective, it is believedthat new sales opportunities for the selling of insurance will emerge as IT has
evolved to such an advanced level.
A major issue presently affecting the selling of insurance is the growing
inability to engage in occupational sales.
Once upon a time, it went without saying that a salesperson working for an
insurance company would visit the office of a company during the lunch hourand engage in sales in hopes of getting a few employees at the company to takeout insurance policies. This practice is what we refer to as occupational sales.
However, it is almost impossible to find cases in which this approach tosales is allowed these days. This is because, thanks to advancements in IT,
most companies have come to regard the leakage of information to outside
parties as a significant management risk.
Consequently, salespersons belonging to insurance companies are no longer
able to engage in occupational sales. New approaches to the selling of
insurance products are thus needed.
What is conceivable in this connection is a new approach whereby
insurance products are sold by consulting companies like ours.
This is because, while a salesperson belonging to an insurance company
cannot enter the premises of a company, consultants like us are given freeaccess to such places as long as we are interacting with a given company on a66

daily basis. Therefore, if a consultant were to sell an insurance policy
providing a certain level of coverage for a low premium amount on a groupbasis, it would be possible to secure clients for insurance products through anapproach that differs from what has been conventionally applied.
For a consultant like me, this approach allows me to go beyond just giving
my opinion on the management policies and strategies of an insurancecompany from a third-party perspective as has been the practice in the past. It
also allows me to truly commit myself to the business itself of an insurancecompany.
It is possible that, as the age of AI picks up steam, it will be consulting
companies that possess a stronger initiative than anyone else when it comes tothe business of selling insurance products. Up until now, the very idea of
having a consulting company sell insurance products was simply inconceivableby the norms followed in the industry. As AI, Big Data, and FinTech gain
ground, however, this idea is becoming more and more feasible.
To what extent will AI-driven automation occur?
As AI continues to encroach on the operations of insurance companies, we
ask ourselves: to what extent will the automation of the insurance businessoccur?
Underwriting assessment-related operations are probably a better matchwith AI than anything else in this field. Underwriting assessments are carriedout to determine whether the company can provide insurance coverage to agiven client and to figure out whether a client is seeking to enroll in a policy
with the intent to commit insurance fraud.
There are two types of underwriting assessments: business underwriting
assessments and medical underwriting assessments.
For a business underwriting assessment, the company endeavors to figureout whether there is a risk of insurance fraud based on various pieces of client
information, such as the income of the policy-concluding client. For example,
if a person with an annual income of five million yen wishes to take out a 200
million-yen insurance policy, the person in charge of conducting theunderwriting assessment might sense that there is something suspicious about
this file. This is because the amount of insurance money involved is too highfor this income level.
Chapter 3 67

If you were to take out an insurance policy that provides a high level ofcoverage in terms of the insurance money to be paid out, the insurance
premiums would naturally be high as well. If a household with an annual
income of five million yen wishes to take out a 200 million-yen insurance
policy, the monthly premiums alone would put a serious damper on theirlifestyle. To nevertheless attempt to take out a 200 million-yen insurance
policy would be flagged as irrational.
There is also a method for determining whether the amount of insurancemoney is appropriate based on the address of the client. If income levels differ
between a person living in Tokyo and a person living in the countryside,
lifestyles between the two will also differ. Thus, since the appropriate level of
insurance money—in the sense that insurance money for someone living inTokyo should be a certain amount while insurance money for someone livingin the countryside should be another certain amount—can be determined basedon past data, the possibility that insurance fraud is at play can be determinedaccordingly.
Figure 13 / Illustrating how AI-driven automation can reduce costs and time
Business
underwriting
assessment(Determine
whether there is apossibility of
insurance fraud)

Medicalunderwriting
assessment(Determine therisk that thepolicyholder willcontract an illness)

Automatic
processing by AI
based on the useof Big Data
without any
manualintervention

Possible toreduce workforce
by several
thousands of
employees andthereby reduce
personnel andother costs

Achievereduction inpremiums
through a
reduction in
management
costs

A medical underwriting assessment is performed to determine the risk thatthe policyholder might become sick. There are a number of parameters that
help to determine, for example, if the blood sugar level is high, blood pressure
is high, and the gamma-GTP level is acceptable. After checking these values,
you can determine whether or not the client is seeking to enroll in an insurance
plan while hiding the risk that he or she might become ill.
If an individual enrolls in an insurance policy by concealing the fact that heor she is sick—and not just sick but suffering from a life-threatening
68

condition—and subsequently dies after hardly paying any premiums at all, theinsurance company will end up sustaining huge losses. Thus, a medical
underwriting assessment is conducted to prevent insurance fraud fromoccurring.
If each individual policyholder’s health condition were to be checked by aphysician before a determination is made, however, the processing of
applications would grind to a halt. Therefore, people known as medical
underwriters determine, based on their experience and intuition, whether it
would be fine to allow prospective clients to take out insurance policies.
In this way, determinations have been made up to now for both businessunderwriting assessments and medical underwriting assessments through areliance on the experience and intuition of underwriters. Fundamentally
speaking, it is possible to fully replace these elements with AI.
AI-driven automation will conceivably evolve not just for assessments
conducted for the underwriting of policies, but also for investigations
conducted for payment operations.
At any rate, those who plot to engage in insurance fraud will work out
various schemes to achieve their ends. For example, they might try to fabricate
medical certificates or make bogus requests in collaboration with a doctor or
attempt to make a suicide look like an accident.
Of course, a suicide would come under a contractual exclusion of insurance
liability. Consequently, no insurance money would need to be paid. However,there are sometimes cases in which an individual who has racked up huge debts
will seek to have insurance money paid out to his family even if it were torequire him to commit suicide. Thus, the determination as to whether a death
was a suicide or caused by a different factor is exceedingly important and canbe difficult to nail down correctly.
A given death will be investigated by an insurance investigator, who will
determine whether or not there are reasonable grounds for paying insurancemoney in accordance with his or her own past experience and intuition. In thisarea as well, it should be possible to adopt AI and make determinations as tothe propriety of paying insurance money without having to get insurance
investigators to play a role as they presently do.
AI can also be utilized for operations.
As mentioned earlier, the massive old systems in use by insurancecompanies are in truly dire straits, such that the industry will eventually need to
Chapter 3 69

aspire to make a unified platform a reality.
However, since it will still take a lot of time to bring about this end goal,
existing systems must continue to be maintained. Nevertheless, it is incumbent
that we acknowledge the reality that the number of people able to perform
maintenance work is gradually declining. In connection with this, AI-based
maintenance should be undertaken.
Since current systems have become entirely too big, nobody has any idea of
how the upgrading of a certain part will affect other parts of a given system.
While there may be programmers who are capable of providing clarity withrespect to impact in some cases, most of them have retired by now without
having passed on their know-how to younger programmers.
Accordingly, it would be ideal to have AI learn in minute detail what parts
will be affected by the upgrading of any given part.
This would allow the upkeep of systems that have been maintained, thanks
to the experience and intuition of human beings to be carried out without theintervention of human beings. And because this is AI we are talking about,there would no possibility of having to deal with memory whose caliber may
sometimes be dubious.
Insurance premiums will also go down thanks to AI
Such examples of AI-driven automation will naturally result in thedisplacement of employees who have previously been involved in such work
by AI.
In this connection, this will give rise to a significant reduction in personnel
costs.
If we are talking about insurance assessments, for example, then we shouldnote that a certain major insurance company employs several thousand people
for just underwriting-related operations. If these employees were displaced by
AI, then it follows that the insurance company would benefit from a huge
reduction in costs.
When it comes to payment operations as well, significant personnel costs arealso incurred since insurance investigators expend considerable time andenergy on figuring out whether insurance fraud applies in any given case. If
AI-based investigations could be automated, personnel costs in this area too
could be drastically reduced.
70

Figure 14 / A life insurance company’s core profits derive from differences ininterest rates, differences in mortality rates, and differences in expenses
Differences
in interest
rates

Differences
in interest
rates
Expectedinterest rate

Actual interest rate
on investments

Differences
in mortality
rates

Differences
in mortality
rates
Expected amount of insurancemoney/benefits to be paid
based on the expectedmortality rate

Differencesin expenses

Expected amount of
insurance money/benefits
to be actually paid

Differencesin expenses

Expected amount ofbusiness costs to be paid

The adoption of AI will
enable a reduction incosts associated withdifferences in mortality
rates and differences in
expenses and provide
plenty of room to lower
premiums.

Actual amount ofbusiness costs paid

The same can be said with respect to the adoption of AI for the maintenanceof operations that we touched on last.
The core profits of a life insurance company derive from differences ininterest rates, differences in mortality rates, and differences in expenses.
Differences in interest rates refers to the difference between the expectedinterest rate and the actual yield on investments. Differences in mortality rates
refers to the difference between the expected amount of insurance money andbenefits to be paid based on the expected mortality rate and the actual amountof insurance money and benefits paid. Differences in expenses refers to thedifference between the expected amount of business costs to be paid based on
the expected business cost rate and the actual amount of business costs paid.
As explained earlier, the adoption of AI should enable a significant
reduction in costs associated with differences in mortality rates and differencesin expenses. For an insurance company, this will permit exceptionally large
cost reduction effects to be realized.
Chapter 3 71

The advantages here do not accrue to insurance companies alone. If
insurance company costs decrease, benefits can also be reaped by insurance
policyholders. In other words, room to lower premiums will be provided to theextent that costs go down.
From sales with a personal touch to sales entailing the ascertainment oflife plans
If AI continues to infiltrate the insurance industry, the sales approach usedby insurance companies will also undergo significant changes.
In particular, sales that are undertaken through people have long taken theform whereby a salesperson repeatedly visits a client, makes himself or herself
a familiar figure with the client, leaves a mountain of pamphlets and businesscards behind with the client, gets the client to express interest in what thesalesperson is selling, and finally has the client engage in a first-timetransaction. This sort of traditional approach to sales involving grit and mettle
will surely lose its meaning over time. Instead, the ability to communicate withpeople at a clearly high level will likely come to be in demand.
What I mean is that the time when product selection will be almost entirely
done by AI is arriving. When that time arrives, what would a humansalesperson be tasked with doing? I feel that he or she should listen carefully toeach client to figure out how the client wishes to live.
I’m making sufficient money. When this is bequeathed to my children, I’dlike to leave it in the form of cash as much as possible.
I operate a company as a sole proprietor. I’d like to vest my children withthe right of management as soon as possible and would like to draft a financial
plan that would need to be implemented when that time comes.
I’m a building owner, which means that most of my assets are in real estate.
I’m asking you to consider a method of bequeathing what I own as much as
possible without depleting these assets.
In these ways, there are all sorts of money-related concerns that people
have. The greater the amount of assets held by a client, the greater the level ofseriousness of these concerns.
The most ideal insurance product is to be selected according to each client’s
life plan. The selling of insurance will henceforth be focused on ascertaining
each client’s life plan. The selection of the most ideal insurance product in72

each case will then be undertaken by AI.
Value proposals that can be made precisely because they are made byhuman beings
An explanation of the concept of a unified platform for the insurance
industry was made in the preceding chapter. We hope that the various benefits
to be accrued to both the insurance industry and to clients by the realization ofthis vision are clear.
In this book, this concept of a unified platform is described with a primary
focus on the insurance industry. In the future, we would like to expand thisconcept to encompass not just the insurance industry but also other financial
sectors.
Up to now, there have been various information barriers separating theinsurance industry, banking industry, securities industry, and real estateindustry from one another, such that there were few connections among thesevarious sectors. Proper connections will gradually form over time thanks to
FinTech.
In the area of household account platforms, banks, securities firms, credit
card companies, asset management companies, and others have already cometogether through shared platforms to enable the comprehensive management ofincoming and outgoing flows of funds in personal household accounts. In the
future, data will be structurally organized and data contained in various
databases will undergo Big Data analyses. Evolution will proceed to the point
where optimal insurance products will be selected and proposed by AI.
To have insurance products selected and proposed by AI is especiallyeffective for insurance agencies.
For insurance as well, there will continue to be increased segregation
between insurance companies that design and create insurance products andinsurance agencies that sell insurance products created by insurance companies.
This is a trend that I believe is to be expected.
As part of this trend, insurance agencies deal with products offered bymany different insurance companies. Thus, there is a limit to how muchproduct knowledge can be learned by any single staff member of an insurance
agency. Without product knowledge, it would not be possible to grasp why agiven client wishes to purchase an insurance policy or the needs of a given
Chapter 3 73

client.
Therefore, it would be better to adopt AI and rely on AI for specific productselections and recommendations, given that the speed of information
processing by AI is expected to be far greater than that of human beings in the
future.
On the other hand, the task of engaging in more human conversations withclients than are being engaged in now in order to skillfully figure out eachclient’s future life plans should be the most important task to be carried out by
salespersons. To this end, insurance company salespersons themselves willneed to refine their own human nature.
In broadly surveying the future of the insurance industry and other financial
sectors, we see that some people have expressed concerns over the possibility
that the rapid growth of IT, AI, Big Data, FinTech, and other suchdevelopments could cause the displacement of people. Rather than the rapid
loss of jobs, however, it is more likely that we will see rising demand forpeople in other areas.
In the first place, FinTech has grown to this point in part due to the way inwhich those who lost their jobs due to successive restructuring actions taken byfinancial institutions in the wake of the 2008 Lehman Shock managed toharness their ingenuity in other ways.
Likewise, even if the evolution of FinTech were to result in the loss of jobs
in the financial industry in the future, the newly unemployed would likely be
sufficiently reabsorbed through reassignment to new financial sectors.

74

Chapter 4
and clients

How digitalization will change the links between insurance

An insurance industry that is finally facing a turning pointIn May 2016, the revised Insurance Business Act went into effect.
This revised statute stipulates a number of rules that must be properly
observed whenever an independent agency sells an insurance product to aclient.
First, whenever an insurance agency sells an insurance product to a client,
the agency is required to ascertain the client’s intent.
Of course, the selling of insurance in a manner that ignores the needs of theclient should be strictly avoided. While insurance agencies that sell in such amanner have never been allowed to operate in such a way, the latest version of
the Insurance Business Act mandates the ascertainment of each client’s intent.
Accordingly, the checking of client intent, which had been largely
disregarded in the past, will henceforth be strictly carried out in writing and byother means.
Once the intent of a client has been ascertained, an agency is then also
obligated to present numerous insurance products in line with the client’s
intent. In addition, an agency is also required to properly explain why theseinsurance products were recommended.
Since an insurance agency is also a business, it is natural to expect that it
will try as much as possible to sell products tied to high levels of salescommission. However, by mandating the provision of a proper explanation toeach client as to why given insurance products are being recommended,
insurance products with commissions that are unreasonable for satisfying clientneeds became harder for even insurance agencies to sell.
Incidentally, it is also possible that insurance products sold at bank counterswill become subject to an obligation to disclose sales commission amounts.
This remains a matter under ongoing discussions and debate.
With these amendments, the Financial Services Agency has begun to soundthe alarm on the process by which insurance products were not always soldwith a focus on the needs of clients.

Chapter 4 75

A reality characterized by more and more insurance options and risingpremium revenue
The insurance industry is riding a wave of extremely massive structuralchanges that go beyond these amendments that have been made to theInsurance Business Act. As mentioned earlier, Japanese society has finallyentered a full-scale phase of depopulation.
Population estimates provided by the United Nations suggest that Japan’s
population, which currently stands at 120-something million people, will
someday—albeit not too soon—drop below ninety million people.
A population decline also means that there will be fewer people who pay
insurance premiums to insurance companies. Naturally, premium income
earned by insurance companies will decline.
An even bigger problem will be the depletion of prospective client lists.
The traditional approach to selling insurance, which involves reaping large
numbers of prospective clients, will gradually fail to remain valid as the
population shrinks. Moreover, the practice of purchasing lists of prospective
clients from list brokers has also become increasingly difficult to undertake.
Up to now, seminar operators would frequently advertise and hold freeconsultation events complete with money-related seminars in collaboration
with insurance agencies, convince several dozen participants to converge at arented venue in which a positive atmosphere could be created, hold freeconsultation events on insurance while giving lectures, and seek to induce
participants to sign up for new insurance policies at these free consultation
events. Such events are akin to the selling of lists of prospective clients.
However, it is expected that the Financial Services Agency will keep astricter eye on things, such that insurance agencies will find it harder to acquireprospective client lists through such free seminars. Thus, a new approach needs
to be conceived.
In this connection, insurance companies and independent agencies aretrying to figure out how they can raise their clients’ wallet share.
Wallet share is a marketing term indicating how much of a customer’s cost
for a given product goes to a specific company. In terms of the insurance
industry, the wallet share is the ratio, expressed in percentage terms, ofpremiums paid by a client to company A, for example, to total premiums paidby the same client yearly.
76

Figure 15 / Individual insurance policies are rising both in termsof insurance amount and number of policies(x 100 million yen)(x 10,000 policies)
Number ofpolicies

Aggregate insurance
amount

2011

2012

2013

2014

2015

Source) Life Insurance Association of Japan, Life Insurance Trends for 2016

Let us assume that you pay 400,000 yen per year in insurance premiums, ofwhich 200,000 yen is paid to company A. Company A in this case has a fifty
percent wallet share.
To increase your wallet share, you need to ask how you can get clients toincrease payments of premiums to your own company out of the amount they
allocate to the payment of insurance premiums.
If it becomes unlikely that the insurance market as a whole will expand,each insurance company will have no choice but to endeavor to figure out how
to get clients to purchase more of their own products in order to increase theirown slice of a pie that is not getting any bigger.
It is perhaps for this reason that more and more insurance options are being
offered these days. If we look at the statistics, we see that the amount of
insurance premiums per policy is declining but that overall revenues frominsurance premiums are rising. In other words, the number of insurance
policies in effect is actually increasing. This likely indicates the extent to which
insurance options are increasing in number.
Conceivable reasons for this include the appearance of insurance options tocover risks that have newly emerged due to societal changes and theintroduction of insurance policies that are now available to those who had
Chapter 4 77

previously been unable to take out such insurance policies.
Mobile phone insurance is a typical example of the former.
With mobile phone insurance, you could be insured for an unlimited
number of mobile phone repairs costing up to 100,000 yen in value per year if
you were to pay, for example, 700 yen per month in premiums.
There are probably many people who have dropped their smartphones andcracked their screens and who were later required to pay a higher-thanexpected amount to repair their units.
Insurance was thus developed to meet the needs of such people. It wasconceived precisely because of the introduction of smartphones to the world.
Relaxed underwriting standards-type insurance, limited disclosure-typeinsurance, no-disclosure-type insurance, and guaranteed-issue-type insurance
are examples of the latter. These types of insurance can be taken out by people
who might have suffered a serious illness in the past or by people who are
currently ill. The fact that there are more insurance options that can be takenout by people who would have been rejected in the past is one that also
constitutes a factor behind the increase in the number of insurance policies thatare presently in effect.
In addition, various kinds of elaborately planned insurance options havealso popped up, such as one in which the purchase of a drink in a plastic bottle
or can sold out of a vending machine comes with an automobile insurance
policy good for one day only or a golf insurance policy.
The insurance industry consists of companies that are seeking to raise theirclients’ wallet share by designing all sorts of new insurance policies to coverthese various types of risks. In brief, these companies are trying to cultivateclients bit by bit with an eye on long-term trends.
While it is important to increase the odds of converting prospective clients
into actual clients, a consideration of the current sales environment in theinsurance industry suggests that it is also important to try to raise the walletshare of existing clients (existing policyholders) by targeting them withinitiatives.
Understanding existing policyholders is a point of departure in digitalmarketingIn order to raise the wallet share of existing policyholders and promote the78selling of insurance products, you will need to understand existing
policyholders. To this end, digital marketing is a tool that needs to be
implemented on a full-scale basis by the insurance industry.
As explained in Chapter 1, insurance companies simply did not possess any
thought of engaging in marketing on their own. Marketing was fully delegatedto insurance agents assigned the central role of selling insurance products.
These days, however, this state of affairs is untenable.
For most companies today, security in different respects has becometightened in order to avoid the risk of leaking information to outside parties.
For this reason, insurance agents can no longer visit the offices of companies
during the lunch hour to urge people to sign up for insurance policies as theyused to in the past.
And as explained earlier, it is undeniable that there will be fewer clientssigning new insurance policies given the shrinking population of the country,
dwindling client lists, and the depletion of lists of prospective clients.
In the face of such circumstances, it is imperative that insurance companies
consider marketing with a serious attitude.
As IT becomes more advanced, it will be digital marketing that will
constitute the means by which all sorts of digital media and devices will be
used for this purpose.
What exactly is digital marketing?
The question that always arises whenever the topic of digital marketing is
broached is: What is the difference between web marketing and digitalmarketing?
In the IT world, there are a number of concepts that are referred to bydifferent labels but that are believed to be essentially the same thing.
For example, Big Data analysis is not much different from what we used torefer to as data mining. With this assumption kept in mind, let us consider what
is meant by digital marketing.
First, let us examine how digital marketing differs from web marketing.
Most times, any reference to web marketing is a reference to marketing that is
focused solely on the Internet.

Chapter 4 79

Figure 16 / Digital marketing and web marketing

Digital marketing
Collective term for marketing
based on the use of digitaltechnologies

Web marketing
Marketing that iscompleted on the Web

In other words, web marketing typically entails the following types ofactions: engaging in search engine optimization (SEO) to promote increased
numbers of visits to a company’s website (measures designed to increase
online visibility in terms of search result rankings on a search website like
Google or Yahoo!), ordering listing ads and banner ads for placement on
websites, taking measurements of the number of website visitors who proceed
to engage in actual purchasing actions, and more.
In these cases, web marketing primarily consists of deploying promotion
campaigns and inducing purchasing actions on the part of consumers in an
online sphere.
In contrast, the concept of digital marketing is also broadly deployed inareas beyond just the Internet.
In other words, digital marketing consists of such initiatives as thefollowing actions, which are undertaken in order to increase traffic (datavolume) to e-commerce sites (sites that sell goods and services online):
deploying company or brand sites and community sites in parallel; attempting
to guide consumers to e-commerce sites by harnessing Facebook, Twitter, andother social-networking services; producing and sending email magazines
containing the latest in information on bargains and sales to email addresses
registered by clients; providing applications that can be used not just with80

personal computers but also with smartphones and tablets; and issuing points
and coupons for the promotion of sales.
The concept also entails the accumulation of data concerning purchasing
actions carried out by clients who have purchased items through e-commercesites and the analyzing of purchasing actions that can be linked with future
consumption.
The deployment of a broad range of marketing tools based on the use of all
digital-related media and devices in such cases constitutes the core notion ofdigital marketing.
For companies that have brick-and-mortar outlets, omni-channel is an
important way of thinking to aid in the formulation of a marketing strategy.
Omni-channel is a marketing tool for increasing points of contact withclients using not just web-centered digital marketing but also television,magazines, newspapers, and other existing forms of media; digital synergy(networked electronic signboards installed outdoors, at outlets, ontransportation vehicles, and elsewhere); the Internet, social-networking
services, brick-and-mortar stores; and other channels.
As terms that have been explained above, Web marketing, digital marketing,and omni-channel are not concepts that are independent of one another. I
personally believe that all present-day marketing falls under the category ofdigital marketing. In other words, it is my belief that marketing IS digitalmarketing.
Think about it carefully. In this day and age, no matter what marketing tool
is applied, nothing will come of the implementation of any action that isconstituted without reliance on digital power.
These days, the pairing of digital marketing and AI is also proceeding
steadily, such that even marketing ideas that had not been previously
entertained are being studied.
For instance, there are places where large Aurora Vision screens have been
set up on the street. Advertising videos and other types of footage areconstantly being shown on these screens. No doubt you have had moments
when you were waiting for someone and you then found yourself glancing
involuntarily at what was being shown up on one of these screens.
Imagine that there is a camera mounted behind each Aurora Vision screen
to film, from behind the unit, the throngs of people who are watching what isbeing shown on the front of the screen.
Chapter 4 81

This camera records all viewers watching the images being shown on the
Aurora Vision screen. AI is harnessed to categorize these viewers in detail bydetermining, for example, the sex and age bracket of and clothing worn by
each viewer. The system engages in a comprehensive process of analysis todetermine who is watching what, the duration of such actions, and more.
This and other modern marketing tools cannot remain isolated from digital.
Therefore, as noted above, marketing is equivalent to digital marketing andmarketing without digital is inconceivable.
A new way of acquiring clients through the use of FinTech
Earlier, we indicated that insurance companies should utilize digitalmarketing in order to understand their existing policyholders.
Let us elaborate on this statement.
Insurance companies have not attached much importance to theirrelationship with existing policyholders up to now. An ongoing approach tosales by which salespersons would ceaselessly hunt for new clients one after
another was the biggest factor behind this state of affairs.
However, this approach is now impossible to take. Of course, there are avery low number of insurance agents—as it were, charismatic insurance
agents—who are capable of taking this approach but most are incapable oftaking things that far. Their sales results gradually fall as new policies become
increasingly difficult to secure, and they eventually leave their jobs.
Most clients enroll in an insurance plan due to a personal connection. Oncethe salesperson who was in charge of a client’s file at the time the client takesout a policy resigns, a new salesperson will take over the file. In this case, there
will typically be little contact established or maintained between the newsalesperson and the clients of his or her predecessor.
A not insignificant number of clients too forget that they once took out aninsurance policy. Despite the fact that insurance is often described as thesecond-most expensive purchase in a person’s life after a home, it often
becomes an invisible feature of life in no time at all.
Of course, this is not something that troubles insurance companies. As longas a client’s bank account does not change, a change in his or her address or
telephone number will not prevent premiums from being collected.
Consequently, the relationship between a client and his or her insurance82company gradually becomes distant and a given policy will come to be placedin the charge of someone unknown.
Deepening relationships with existing policyholders is akin to eliminatingthese kinds of policies. Essential to this aim is the establishment of anenvironment in which communications can be maintained with existing
policyholders. An insurance company will need to provide various types of
information to and otherwise communicate with existing policyholders.
There is in fact awareness of this need in the insurance industry, such thatthe practice of collecting email addresses of clients has been spreading acrossthe insurance industry in recent years.
The reinforcement of relationships with existing policyholders can befurther promoted by utilizing FinTech.
One method for this purpose that the insurance industry has begun studying
entails the effective use of clients’ bank accounts. This is because an
examination of the status of transactions through bank accounts can reveal
much about a person’s life and allows the first step towards getting to know aclient to be taken.
It is in this context that FinTech can emerge and play a role.
If FinTech were used to combine account information possessed by bankswith client information possessed by insurance companies, the volume of
information itself would increase, and marketing based on the results of thisprocess would further promote a greater understanding of clients. By analyzing
the state of transactions through bank accounts, you could develop a better
picture of the ideal approach to take in dealing with a given client at a given
stage of life.
In fact, a project to link banks with insurance companies by way of thedevelopment of an application that enables real-time settlement through banks
has begun to be rolled out.
There are a number of different methods by which someone who has takenout an insurance policy can pay premiums for the first time.
The first method consists of payment with cash. This is the easiest method
to undertake. Cash is received from the client and a receipt is issued tocomplete the transaction.
The second method consists of settlement using a credit card. With thismethod, on-the-spot settlement can be carried out using a credit card reader.
Alternatively, premiums can also be paid online.
Chapter 4 83

The third method consists of transferring the required funds into a bankaccount. A transfer is carried out once the required fields on a given form arefilled out and preparations for a transfer with a bank account have been made.
Among these options, bank account transfers currently pose procedural
difficulties. For example, let us assume that a client born on June 30 indicates adesire to pay insurance premiums for the first time with a bank account transfer,since he will be taking out an insurance policy on June 20.
However, banking procedures take up quite a bit of time to carry out. If it is
not possible to complete transfer procedures until July, the client would beinconvenienced in this case. That said, if the client becomes a year older onJune 30, his premiums could rise as of his birthday.
Accordingly, this project could help by developing an application to linkbank accounts with insurance companies and thereby creating a scheme toenable prompt settlement procedures to be undertaken.
Completion of this endeavor would clearly prevent a situation in which thebank transfer in question is delayed to thereby cause premiums to be paid by
the client to rise.
Of course, this would not constitute a simple settlement application. Instead,
it would bring together information on the client residing in his bank accountto allow for the state of assets held currently by the client to be ascertained, on
the basis of which optimal insurance products could then be recommended andnew asset-formation proposals could then be made.
As mentioned earlier, if a unified platform were to encompass not just theinsurance industry but also banks, security firms, and other types of financial
institutions, then paper-based interactions accounting for contractual
deficiencies could be eliminated, and the proactive provision of information toclients could also be facilitated. In this sense, this would constitute a highly
progressive initiative.
If this initiative were to be actually launched, it should be possible toharness the latest marketing tools and trigger the proactive cultivation of clientsin the insurance industry, a sector that has traditionally eschewed any hint ofmarketing in the past.
FinTech is essential for ascertaining the needs of current policyholders
Allow me to reiterate: it is absolutely essential for the insurance industry
84

going forward that existing policyholders are not ignored and that they are
instead engaged with constantly. This is because the pool of clients that takeout new insurance policies will likely continue to shrink in size.
In particular, people in their twenties are highly disinclined to taking out
new insurance policies due to their aversion to incurring costs. Thus, one
cannot expect that new company employees will be taking out insurance
policies as they once used to do. Consequently, insurance companies will beforced to primarily target existing policyholders who are thinking aboutswitching insurance policies.
It is here that there are in fact a number of potential opportunities.
For example, a prospective client does not need to be enrolled in a redcarpet insurance policy to cover contingencies involving death while he or she
is still single, since there are no dependents to worry about. Therefore, it would
be sufficient for such a person to enroll in a medical-care insurance policy ordisability (income-replacement) insurance policy.
However, once you get married and have kids, you will need to enroll in amore substantial insurance plan that provides a proper death benefit inanticipation of any possible negative consequences that might happen to you.
Figure 17 / Required coverage changes according to your life stage
Group credit life
insurance

Medical-careinsurance

Medical-careinsurance

Disability
insurance

Mortality life insurance

Marriage
Twenties

Thirties

Retirement
Forties

Fifties

Sixties

However, when someone purchases his or her own home, he or she will
typically enroll in a group credit life insurance policy at the same time that amortgage is taken out. In this case, since insurance money from the groupcredit life insurance policy would be used to repay the outstanding balance ofthe mortgage in the event that the policyholder dies, the arrangement issubstantively equivalent to enrollment in a mortality life insurance policy. For
this reason, one option that can be taken is diminution of the death coverage
Chapter 4 85

portion of the life insurance policy in which the client had been enrolled to thatpoint in time.
If you were to then get older, retire from your company, and end up
spending less time and money on raising children, generous death benefits
would no longer be necessary. It would be sufficient from this time forth to beenrolled in a medical-care insurance policy that could be used to coverhealthcare costs incurred in the event that you fall ill.
In this way, the coverage you will need varies according to your life stage.
Therefore, if needs are properly identified, it will be easier to urge existing
policyholders to switch and advise that they enroll in whatever insurance
policies they need at any given time. Such an approach is what will be requiredin order to sell insurance.
In order to ascertain the needs of existing policyholders, FinTech will also
be an essential element of the selling of insurance in the years to come.
Improving maintenance operations through digital marketing
The effects and aims of digital marketing fundamentally consist of theconversion of prospective clients into actual clients through continuous efforts
to provide a variety of information to prospective clients and the raising ofexisting clients’ wallet share.
In order to allow the effects of digital marketing to be generated more
quickly, however, digital marketing should be utilized for maintenance
operations. In the insurance industry, maintenance refers to the accommodationof name changes and changes in conditions after a policy is concluded,
responses to inquiries, and more.
The persistency rate and incidence rate are important factors for surmising
the impact that maintenance operations have on performance. The ability tolower the incidence rate at the same time the client retention rate is increased
will significantly bolster the company’s overall bottom line.
A total of 151.73 million life-insurance policies have been taken out by
individuals as of fiscal year 2014. Given that this means that an enormous
amount of client data has been accumulated, the aim is to utilize such data asdata for digital marketing and obtain specific effects.
For example, the persistency rate is the inverse of the surrender rate. Dataon people who have previously canceled their policies before they expired86

should be extracted and subjected to an analysis to determine the circumstances
behind such cancellations. Doing so would reveal that some people canceled
for reasons that suggest that cancellation was the right course of action to takeand that there are also a significant number of people whose policies werelapsed.
The latter type of person consists of clients who can no longer withdraw
money to pay for premiums from their bank accounts. This is because, if an
insurance company were unable to withdraw insurance premiums from a bankaccount within a certain period of time, the insurance policy in question would
be handled as if it were canceled in accordance with its contents.
With respect to clients whose policies are lapsed because of this inability towithdraw amounts from their bank accounts, there is likely, based on an
examination of trends in terms of account information and different types oftransactions, a considerable number of clients out there whose policies can be
maintained just by reviewing the timing of salary and other cash receipts andthe payment of insurance premiums and other cash disbursements and bysending a single email message to notify of any account balance shortage.
The realization of this sort of approach requires the development of a
profile of clients who are highly likely to cancel. The precision with which
existing clients can be ranked in terms of the rate of cancellation will be
increased by also taking bank account transactional information into accountalong with data that have been traditionally considered (such as the attributesof canceling policyholders, the policies in which they are enrolled, and theinsurance premiums they are paying) to expand the range of measures that canbe taken.
This will allow the persistency rate to dramatically rise and insurancecompanies’ bottom line to improve in no time at all.
Transforming potential clients into actual clients through linkage with a
DMP
Up to this point in this book, we have written about the use of digitalmarketing directed at existing policyholders. However, the fundamental
question we must ask of digital marketing is, as expected: How can we
cultivate prospective clients and convert them into actual clients?
As mentioned already, however, this is no easy task. Needless to say, this is
Chapter 4 87

because information on prospective clients is generally insufficient.
Figure 18 / Digital marketing based on the use of consumer data
DMP
(data management
platform)
Advertising agencies
and other companies inpossession of public
information

Digital marketing(tool)

Cultivatingprospective clientsand effectively
converting them into
actual clients

While the conversion of prospective clients into actual clients is somethingthat everyone hopes to accomplish, it represents a huge challenge to insurancecompanies given how highly difficult it is to secure policy signings when there
is so little information with which these companies can work.
In this connection, insurance companies are seeking to integrate with DMPs
that collect information.
DMP refers to data management platforms, which are enterprises thatcollect and store public information. Advertising agencies are perhaps a typicalexample of this concept.
Since an advertising agency is a marketer, it would possess huge amountsof consumer data sufficient to enable a picture of clients in this world to be
drawn. By integrating with a DMP, a means of approaching prospective clients
will emerge.
By combining what has previously constituted a truly vague picture ofclients with detailed consumer data possessed by DMPs, it will become easierto formulate hypothetical models that peg behavioral attributes to persons withattributes similar to those of a given consumer and that then lay out the actions
that are likely to be taken.
You have probably already seen the results of such digital marketing on
various websites with your own eyes.
For example, let us say that you have been searching for shoes. When you
then visit a completely unrelated site, an advertising banner for shoes isdisplayed for some reason. This example can be described as one form ofdigital marketing.
88

Insurance products are no different. If we digitally analyze consumer
behavior and daily lifestyle patterns inferred from web-viewing trends andhave website banners displayed in a way that is tailored to each individual, it ispossible to help induce subsequent consumer behavior.
It is here, however, that a challenge in a very real sense is posed. Can theposting of ads in this manner actually help induce purchasing behavior?
No matter how much an insurance company understands its clients, it will
be completely meaningless if such understanding does not give rise topurchasing behavior. In other words, while an insurance company works tounderstand its clients, it is necessary to evoke a desire to purchase insurance
products in the minds of clients.
Unless efforts are made to determine just what will cause the purchasing
intention to be formed, it is unlikely that results will be obtained no matter how
much digital marketing is implemented.
What is important for this issue is the question of who will engage in sellinginsurance products.
Presently, we have gone as far as figuring out the kinds of insurance
products that should be proposed to a given type of client and the approach thatshould be taken in making such proposals.
However, real digital marketing also necessitates the concurrent applicationof this approach to the determination of the type of person who should be
assigned to engage in sales activities. Failure to take this additional step will
prevent new clients from being effectively captured.
This is because human beings do not act as logically as one might expect.
In the world of marketing, all measures that are expected to work well are
logically elicited before being implemented, but this can sometimes end in
failure. A measure put together logically might still end in failure either
because the underlying logic was incorrect or because human beings
unexpectedly fail to act in logical ways at times. Most times, the latter
explanation—the unexpected failure of human beings to act in logical ways—
is the one that will be true in a given case.
If we were to apply this discussion to the selling of insurance and assume
that everyone thinks logically and acts accordingly, we could take this idea to
its logical conclusion and argue that the selling of insurance should bedelegated to robots.
Of course, while this is something that is being pursued in a project at the
Chapter 4 89

moment, the fact that, as pointed out earlier, people do not all think logicallymeans that, as expected, there is scope for asserting that sales must remain atask left to human beings to perform.
If we therefore endeavor to convert prospective clients into actual clientsproperly within this context, it will be necessary to develop a framework forreliably matching salespersons with prospective clients by analyzing mattersproperly to determine what type of person should be made to engage in sales
directed at each type of prospective client, in order to successfully lead to theconclusion of new policies.
If all this can be achieved, then one would expect that digital marketing will
also perform effectively.
Sales can be streamlined with digital marketing
By adopting FinTech, the break-even point corresponding to each policy forinsurance companies becomes evident.
For example, let us say that an insurance policy with monthly premiums of
5,000 yen has been taken out by a client. The yearly premium amount equals
60,000 yen (5,000 yen x twelve months). What is important here is to note that
this 60,000 yen amount does not fully constitute profit for the insurancecompany.
It is likely that nearly half of this amount goes to cover sales promotion
costs. You will also need to account for various other costs, including those
attributed to the difference between the estimated costs and actual costs ofbusiness, and those attributed to the difference between the actual mortality
rate and estimated mortality rate that arise in connection with insurance money
claims made when clients die.
If we tally the costs required for the composition of insurance in this way,
we see that the insurance company is initially in a loss position at the time aclient takes out an insurance policy. In the course of the ongoing payments ofpremiums over time, these various costs become extinguished, and the breakeven point is cleared before you know it. From that point forth, the insurancecompany will earn a profit.
Thus, what is more important than anything else for an insurance company
is the extent to which a client who has taken out an insurance policy is willingto continue keeping his or her policy in effect.
90

For insurance companies, nothing constitutes more crucial information than
the information about the profit that the company makes if a given client takesout an insurance policy and keeps it in effect for a number of years. The
understanding of this information is key for the growth of the insurancecompany. If the client is still a prospective client at this stage, there is nothingthat could make an insurance company happier. What is the probability that
this prospective client can be converted into an actual client? And about how
much profit can we earn from this client? These questions can be assumed inadvance.
These numbers can be more accurately estimated by utilizing FinTech.
Specifically, Big Data is harnessed to estimate these numbers based on
examples corresponding to other clients with similar attributes. Estimatednumbers are unlikely to differ significantly from actual numbers since they will
have been provided by Big Data.
If this can be realized, it is expected that the method by which insurancecompanies and insurance agencies engage in sales will be extensivelytransformed.
The traditional way in which insurance used to be sold typically entailed theselling of insurance based on three factors: effort, grit, and a fighting spirit.
However, this way of selling insurance generated too much waste. For the mostpart, nobody can look at a list of prospective clients and determine whichprospective clients can be converted into actual clients and the probability withwhich a conversion can occur.
However, an insurance agent is taught that where there is a will, there is away, and therefore seeks to simply have his or her own face known toprospective clients and believes that the greater the number of business cards
that are stacked up, the greater is the possibility that prospective clients can beconverted into actual clients. Thus, there is no interest in insurance at all.
Indeed, 99 percent of prospective clients could never be converted into actual
clients. The sole concern of these agents is to prostrate themselves and visit
prospective clients. To be frank, this is no different from any other form of
resource waste.
If the population were to shrink, the number of people involved in the
selling of insurance would also go down. To nevertheless promote an approachto sales based on the conventional values of effort, grit, and a fighting spirit isto eventually cause the selling of insurance to come to a standstill.
Chapter 4 91

Therefore, the adoption of digital marketing is necessary.
The benefits of digital marketing as seen from the perspective of clientsAt the same time, what are the advantages for clients that are to be obtained
as digital marketing gains ground?
First, a reduction in costs is an obvious advantage.
The contract rate should go up to the extent that optimal proposals can bemade with ideal timing by engaging in digital marketing. Since operations cancontinue to be pursued without generating waste, costs traditionally incurred
for sales will decrease dramatically for insurance companies.
If this were to happen, commission charges and other fees incurred when aclient purchases insurance could come down.
One can expect to see non-insurance policy services upgraded as well.
It is also easy to grasp the concept of being able to enroll in insurance planscheaply in terms of economic rationality. There is no doubt that this issomething that will please clients who wish to take out insurance. Moreover,clients will now also focus on the contents of services that are provided.
This is because, in the case of insurance, it is rather difficult to go ahead
and differentiate among products themselves. For a domestic insurancecompany in particular, product differentiation may lead to a shrinkage of thecompany’s own market share.
For an insurance company to differentiate itself from other companies on
the basis of products alone, it would have no other choice but to narrow therange of risks it covers and hone the products it offers in order to lower
insurance premiums. This was also the strategy that was implemented byforeign-affiliated insurance companies when they made a foray into theJapanese market.
For domestic insurance companies, however, the implementation of thisstrategy is no simple affair. In this connection, more than a few insurancecompanies will likely think about trying to differentiate themselves in nonproduct areas.
In other words, the upgrading of services in areas outside the scope of
insurance policies will take on greater significance in the insurance market
among those who are battling to survive.

92

Using FinTech to also expand services beyond the scope of insurance
products
Amid these developments, it is expected that the use of FinTech in theinsurance industry will expand.
FinTech can be utilized, for example, in areas outside of insurance policies
to provide optimal advice for the formation of assets. You can go further by
asking whether such advice obtained in this way should be given by humanbeings or by harnessing robot advisors to do the work for you.
In conclusion, with the rise of FinTech in society, it will bring an end to thecompetition that was created among enterprises in different financial sectors
fostered in part by the presence of sectoral barriers that have insurancecompanies dealing with insurance policies, banks dealing with deposits, andsecurities firms dealing with investment trusts.
From now on, insurance companies, banks, and securities firms will
provide goods and services to clients while cooperating with one anotherthrough the use of FinTech.
This in turn will definitely be beneficial to clients.
For example, let us look at this in terms of a collaboration between an
insurance company and a bank. It is conceivable that the optimization of
insurance policies linked with group credit life insurance plans will be
proposed together with mortgages to clients who purchase homes.
When real estate is purchased in a way that involves a mortgage, the bankwill typically have the homeowner enroll in a group credit life insurance policyin order to prevent surviving family members from becoming destitute as aresult of an inability to repay the mortgage in the event that the borrower dies.
As mentioned earlier, however, group credit life insurance is a form ofmortality life insurance. Therefore, if a person already enrolled in a mortality
life insurance policy takes out a group credit life insurance policy, it would
mean that he or she is redundantly covered by mortality life insurance. This isextremely irrational in terms of household finances as well.
This is why it will become possible to advise a client who is enrolled in agroup credit life insurance plan to, for example, reduce the amount of mortality
life insurance coverage he or she already has and enroll in a medical-careinsurance policy with the amount that he or she saves as a result of this action.
This is undeniably advantageous for the client.
Chapter 4 93

In focusing on the insurance industry, we expect that changes will involve
more than just collaborations with other financial sectors. This is because
insurance companies put premiums received from clients to use by investing inthe shares of various different business enterprises in Japan.
By partnering with enterprises and organizations in non-financial industries,
it will be possible to generate new businesses. Put differently, it might be moreaccurate to say that insurance companies capable of doing this will be the ones
that will survive in the years to come.
The leading edge of insurance sales is an area that is undergoing hugechanges due to the adoption of robot advisors
For the insurance industry, the ideal form of digital marketing is thought toconsist of robot advisors.
Robot advisors were originally adopted in the asset-management field andwere designed to automatically create portfolios believed to be ideal for agiven situation once certain details, including your own age, family
composition, capacity for risk, age of planned retirement, preference withrespect to whether you wish to obtain a steady cash flow, preference withrespect to the handling of losses that are incurred, and responses to various
other questions of this nature, were inputted.
We believe that it is entirely possible to adopt a similar scheme for
insurance.
Rather, if anything, we even believe that it is necessary for insurancecompanies to adopt robot advisors precisely because they are insurancecompanies. This is because an insurance policy agreement—and this would beapparent if you read the provisions thereof—outlines contractual conditions
that are so highly detailed that there is a risk that you might find yourself in a
problematic situation wherein your claim for insurance money might not be
accepted if there has been a violation of any of these conditions.
Since these contractual conditions are unduly prescribed in detail, thereality is that there are very few people—whether they belong to agencies or
consist of salespersons or call center representatives—who fully understandthese contractual conditions.

94

Figure 19 / Robot advisors operating in the field of asset management
Age

Familycomposition

Capacity
for risk

Retirement
age

Orientation

Robot advisor

Mentalstate

Other information
inputted

Optimal portfolio is proposed Could it not be possible to also adopt this scheme for the selling of insurance policies?

When it comes to independent agencies that handle the products of multiple
insurance companies, it is even more unlikely in reality that the contents ofcontractual provisions that differ from one insurance company to another will
be fully understood.
Occasionally, you might have a policyholder who wishes to change thebeneficiary under his policy from, for example, his own wife to a grandchild.
The fact is that the range of persons, including family members, who can be
designated a beneficiary is specifically set forth in the contractual conditions ofan insurance policy. It is almost a certainty that there is no insurance agency
out there that is fully and perfectly familiar with such contractual conditions.
However, it would be exceedingly convenient if all of these contractual
conditions were to be digitalized and if there were a robot advisor that could
appropriately make a determination in response to any given request by a clientwith the use of AI. In addition, such a state of affairs would preclude the needfor an insurance salesperson to be occupied with minor routine matters on aconstant basis.
To the extent that robot advisors are adopted, it would allow for the
dedication of more time to engage in communications required to deepen client
relationships.

Chapter 4 95

Chapter 5 Aiming to develop a secure IT platform
An era in which information leaks are directly tied to management crises
The term cybersecurity became well-established with the enactment of astatute known as the Basic Act on Cybersecurity in November 2014.
Through this statute, the following three points are especially required ofcompanies:(i) Information should be safely managed;(ii) Managed information systems and networks should be maintained in ahighly reliable state;(iii) Measures required for this purpose shall be appropriately maintained andmanaged.
Anything that could cause a defect or failure in terms of any of the above
three points to occur and have some sort of negative impact on company
management is defined as a cybersecurity risk.
Figure 20 / Information leaks are a threat to information security
Rank

Top ten threats to information security 2016 (in the case of organizations)First

Information outflow caused by a targeted attack

SecondInformation leak caused by internal fraud and any suspension of business caused
thereby

Third

Theft of personal information from an online service

FourthService suspension caused by a denial-of-service attack

Fifth

Website alteration

Sixth

Increased abuse of vulnerabilities revealed through the disclosure of information onvulnerability countermeasures

SeventhFraud and extortion through the use of ransomware

EighthIllicit use of online banking or credit card information

Ninth

Unauthorized accessing (login) of an online service

Tenth
Information leak caused by negligence
Source: Top ten information security threats 2016, IPA

Why are cybersecurity risks directly linked to managed risks?
In December 2015, the Information-technology Promotion Agency of Japan
96

(IPA) and the Ministry of Economy, Trade and Industry released the
Cybersecurity Management Guidelines, which sets forth definitions thatindicate that the appropriateness of risk countermeasures taken by business
operators and management accountability should be called into question bysociety whenever personal information or secrets are leaked as a result of acyberattack and damage of some sort is thereby caused to society.
I apologize for the use of data that are slightly old here but do you know
how many cases of information leakage occurred in 2014?
In looking only at companies listed with the first section of the Tokyo Stock
Exchange, there were 1,858 companies listed on this exchange as of the end of
2014. Forty-four of these companies confirmed that information leaks had
occurred. While this represents only 2.18 percent of all companies listed on
this exchange, the aggregate number of incidents of information leakage isquite high.
Incidents of personal information leaks from January to December 2013 asreported by the Japan Network Security Association are as follows:
Number of persons affected by information leaks:
9,252,305
Number of incidents involving information leaks:
1,388 (including companies not listed in thefirst section of the Tokyo Stock Exchange)
Total amount of assumed damages:
143,871,840,000 yen
Average amount of assumed damages per incident:
109,260,000 yen
Average amount of assumed damages per person:
27,701 yen
In this way, the overall number of victims of information leaks easily
exceeds nine million. The average amount of assumed damages per incident is
109,260,000 yen. It should be noted, however, that this is just the averageamount.
In an incident involving the leakage of personal information at Benesse
Corporation2 that was exposed on July 9, 2014, up to 35,040,000 pieces of
personal information were found to have been released. The disclosed
information consisted of data on members held by Benesse Corporation andincluded such details pertaining to children and guardians as the name, address,
telephone number, sex, and date of birth of each.
2

Benesse Corporation is Japan’s leading educational support services provider.
Chapter 5 97

Of course, the victims of this incident consisted of individuals registered as
members of Benesse Corporation. At the same time, however, the monetarylosses sustained by Benesse Corporation itself were huge.
On July 31 2015, Benesse Corporation announced that the company had
lost 940,000 members in one year and that total membership, which was once
as high as 4,200,000 members, had declined to 2,710,000 members by April
2015 due to the impact of this incident.
If we look at consolidated performance numbers, we see that sales
amounted to 466,399 million yen for the fiscal year that ended in March 2014
but had decreased to 444,190 million yen for the fiscal year that ended in
March 2016. Current net income went from positive 19,930 million yen for the
fiscal year that ended in March 2014 to negative 10,750 million yen for the
fiscal year that ended in March 2015. The company continued to operate in the
red during the fiscal year that ended in March 2016. The current net income forthat fiscal year was negative 8,211 million yen.
This incident was one that demonstrated how an incident involving an
information leak could not only cause a serious loss of societal trust, but also
inflict severe damage on management for both the leaking party (in this case
Benesse), and the contractor whose actions constituted the primary factor
behind the incident.
Unfortunately, there are quite a few cases in which a company’s security
measures are behind the curve. This is because companies are concerned about
their return on investment.
It is true that the costs incurred for security measures do not directly
generate revenue. Thus, the prospect of spending 100 million yen on security
measures is something that causes companies to hesitate.
As you can see from an example of the Benesse Corporation case that we
looked at earlier, however, mismanagement of this issue could cause acompany to sustain losses in excess of 20 billion yen. One hundred million yen
as the cost of security measures should not be considered a high price to pay.
Information leaks are one type of cybersecurity incident. Now is the time
for many companies to ponder the fact that they are a risk that could seriously
affect the management of a company to a great degree.

98This is how information leaks occur】【

By what process does an information leakage occur? We would like toexplain matters with respect to this question while referring to a number ofdifferent case examples.
Case example

Targeted attacks

Targeted attacks consist primarily of email-based attacks. While one mighttypically think of spam mail as an example of this type of attack, targeted emailrefers not to junk email sent for advertising purposes, but to email with
attachments or URL links that, if clicked, would activate a virus hidden inadvance and cause damage in the form of information theft via whatever
network to which the infected computer is connected.
Furthermore, increasing numbers of exceedingly sophisticated examples ofthis have emerged in recent years. While most blatant examples of spam mailcan be prevented from being received with the use of email filtering software,
targeted mail designed to menace companies are being produced these days insuch a way that they can fool filtering software and avoid being recognized as
possibly dubious email to recipients.
For example, major travel agency JTB announced in June 2016 the leakageof personal information relating to approximately 7,930,000 files.
As part of a typical targeted attack, the email address of an actual company
with which JTB engaged in business was spoofed to send a fake PDF file of apurported copy of an airline ticket to JTB. Sure enough, a virus was containedin this attached file. The computer used to open this file was then immediately
infected. Once this virus was activated, a command-and-control server began
issuing instructions to servers and computers, resulting in the siphoning off ofinformation.
Personal information on approximately 7,930,000 people – consisting ofnames, dates of birth, email addresses, postal addresses, telephone numbers,
and more – was leaked in this case. In addition, passport numbers belonging to
4,300 people were also leaked.
While the identities of the perpetrators remain unknown, it is entirely
plausible that a rival company concocted this criminal scheme. This is because
the leakage of client information would cause the level of trust in that company
to instantly waver.
Chapter 5 99

】【There are also frequent cases involving a sophisticated method by which
invitations to a party are sent out via email with the URL of the venue
contained in the body of the message. Upon double-clicking this URL, therecipient of the email is directed to a completely different website from one
purportedly showing a map of the establishment. With this action, therecipient’s computer will be infected with a virus.
Case example

Shadow IT

Shadow IT refers to the act of freely using one’s own personal smartphone,computer, device, or cloud-service account at work without obtaining thepermission of the employer. Using Facebook, Twitter, Google Drive, or othersuch services for one’s work without obtaining the permission of the employer
is also considered an example of shadow IT.
For example, there are probably people who, intending to bring unfinishedwork home to complete, have sent work files to their home computers via acloud-storage service or email. This is exceedingly risky.
If, for whatever reason, your home computer is infected with malware thatcauses data to be externally leaked, there may be cases in which the contents ofwork files end up being leaked to outside parties.
There are also cases in which a personal device used to examine materials
belonging to the company is then misplaced. For companies that utilize acloud-based solution provided by Office 365, Google, or other such option, therisks associated with this vector are high.
If a misplaced device is picked up by a person having malicious intent, thedata contained in the device could be subject to misuse or abuse. If the leaked
data relate to confidential matters concerning the company, the company’s
management strategy could be severely affected. If the leaked data relate topersonal information, the company will be liable for issuing apologies andcompensation for damages to a large number of individual clients.
Common tactics that are used involve the doxing of prominent figures by astranger who makes their acquaintance during his or her professional duties
and writes or uploads their personal information to Twitter and Facebook. In
2015, a receptionist at a certain establishment told her family about meetingcelebrities and actors who visited the establishment at which she worked. Her
family members posted these anecdotes to Twitter and caused personal
information belonging to these prominent people to be spread online.
100

】

【

These problems highlight the poor literacy of employees and reveals that
there is, of course, a problem in terms of people posting work details andinformation learned through the performance of work to Twitter and Facebook
as well as a problem in terms of a network environment that allows social
networking services to be accessed during work hours.
Case example

Human design errors

Hundreds or thousands of servers that enable Internet services and othercommercial services offered by companies to be run and services that enableinternal operational systems (such as email, file-sharing, and accounting
systems) to be run are set up at data centers and are operated twenty-four hours
a day, 365 days a year.
Numerous computers are set up to access and perform work on data center
servers. By establishing a remote connection to these computers, thesecomputers can serve as a foothold for engaging in work whenever an
emergency situation occurs. If these work computers are connected to theInternet, the risk of infection by a virus through this vector emerges.
These work computers should fundamentally be segregated from theInternet. If, however, a design error allows these computers to be connected to
the Internet, an opening is created for infection by a virus through themalicious accessing of these computers by an outside party. With a foothold
thus gained, data center servers can then be accessed.
Figure 21 / Four main pathways to information leakage
Inside theorganization

Outside theorganization(such as outsourcee)(i) Malicious intent on thepart of an outside party(Virus, targeted attack, andmore)(ii) Human error(Mistaken transmission,
management error, and more)(iii) Malicious intent on thepart of an inside party(iv) Indirect
secondaryleakage(Illicit removal of materials andmore)

Chapter 5 101

These sorts of security risks likewise apply to computers used for factorycontrol purposes. If such a computer is connected to the Internet, infection by avirus is enabled. This situation could then lead to an operational failure.
Fundamentally speaking, a factory’s control systems and theiradministrative computers are typically disconnected from the Internet. In somecases, however, these systems are connected to the Internet due to a design
error or work performed incorrectly at the time these systems were being set up.
In these cases, these systems would be subject to a targeted attack that could
impede factory operations.
If this sort of scenario were to unfold at a food-processing factory withmalice, even food terrorism could conceivably occur. Even if the situation does
not become affected to this extent, the manufacturer would sustain huge losses
if, for example, recipes were altered to prevent products from being released tothe market. Such a company would be brought to its knees if it ended up
making, for instance, salty chocolate.
Thus, technology used for factory purposes is referred to collectively as
operations technology (OT). The risks described here have not yet beenbrought to light but they certainly represent potential problems in a factory
setting.
The latest security measures for preventing information leaks
What measures should you take to combat these sorts of information leaks?
For a targeted attack, the perpetrator will somehow find an opening to
infiltrate a system, set up an exit route, and then access the system again tosteal data.
Thus, the first step to be taken is to put up a firewall or implement an IDS
or IPS network security feature to prevent intrusion at the infiltration stage(entry measure).
Let us assume that the attacker is still somehow able to find a security holeand makes his way into the network. The infiltrator must then be prevented
from leaving by having an exit measure implemented. This is because it will
not be possible for information to be leaked if the infiltrator has no way ofleaving the network.
For an infiltrator, the easiest exit route to take is the same route by which heor she gained entry in the first place. The current thinking on exit measures is102

informed, however, by the thought that the traffic (data volume) at the time an
infiltrator is leaving often differs from the traffic that can be generated throughoperations, such that an infiltrator would be unable to secure an exit route if
only rules setting forth routes to be taken to proceed from an internal network
to the Internet were permitted.
Having taken this thinking seriously, one simplified measure that is being
gradually adopted is network separation. Initiatives to promote the rapid
adoption of this measure are being implemented by local governments dealing
with the Individual Number Card system3. Many companies in the financial
industry are also pursuing studies on this measure.
Network separation is literally the act of configuring internal systems byphysically separating systems that operate while handling important
information from systems that engage in operations while connected to theInternet. It is believed that this approach significantly reduces the security risk
posed by intruders who encroach from an Internet environment.
The adoption of this approach will likely be further promoted as an entry
measure and an exit measure.
At the same time, it is also important to implement an internal measure in
addition to entry and exit measures. This measure is required to prevent
indirect secondary leaks attributable to human errors, internal fraud, andoutside stakeholders.
Generally speaking, if file data containing a given piece of information are
created and handed over to Person A, information management is rendered
impossible since there would be no way to tell if Person A has handed over thisinformation to Person B or if Person A has modified this information himself.
The same can be said even if, for example, a password is applied only when thedata are given or received if, in such a case, the password is cracked.
There is a security risk in terms of the leakage of information from aninternal source.
To deal with this risk, a scheme can be implemented to determine inadvance the authorization granted by the owner of each piece of information topersons who can access this information, persons who can print thisinformation, and persons who can edit this information, and to ascertain towhom this information can be delivered and the identities of persons who have3

The system went into effect to improve social infrastructure. Individual numbers are used foradministrative procedures in the area of social security, taxation and disaster responses.
Chapter 5 103

accessed and edited this information. When Person C, who has been granted nosuch authorization and is thus an unauthorized accessing party, attempts toaccess this information, the information in question can also be deleted fromplaces immediately accessible to Person C.
By adopting this scheme, the leakage of information constituting a valuableasset can be prevented.
In this way, a company can accommodate cyber-security risks that arebecoming increasingly sophisticated by keeping on top of trends in terms of
security measures that are inclusive of entry, exit, and internal measures andconfiguring its own systems through a precise approach to coordination.
The accommodation of cybersecurity risks is required of all companies
competing in a modern business market and helps to ensure a company’s
continued survival and the maintenance of a company’s competitive edge.
Will the IoT lead to information leaks!?
The term Internet of Things (IoT) has come to be used in a variety ofdifferent settings.
This term captures the notion that connections are increasingly being madeamong things via the Internet.
For instance, you can use your own smartphone to check whether the doorof your home is locked, determine the location of your vehicle in a large
parking lot, remotely turn your home’s air conditioner or lighting on or off, ormonitor the hot water in your bathtub, all via the Internet.
These systems are already being operated in the real world to allow somepeople the chance to reap the benefits of the IoT.
As various items become connected to the Internet in this way, however,more points through which infiltrators can gain access open up to raise the riskof malfunctions and information leaks occurring.
For example, what would happen if your smartphone were infected by avirus?
Smartphones are currently linked to all sorts of home appliances and bankaccounts. Cars are no exception, such that we are seeing an evolution in termsof the range of items that can be connected to the Internet.
In 2015, however, the vulnerabilities inherent in this setup were disclosed
in an announcement that indicated that, if an onboard vehicular system were104

hijacked, an infiltrator could use a smartphone to remotely adjust the speed of
the car, lock or unlock car doors, or turn the wipers on or off.
If automated driving becomes widespread and the operating system is
exploited, a potentially fatal traffic accident is conceivable. Traffic problems
occurred previously, where the viral infected traffic lights malfunctioned
resulting in major trouble in the US.
Linkages confer advantages by allowing data volumes to increase andcompanies to do what they want to do more quickly and precisely. On the flipside, linkages provide more opportunities for outside parties to launch viralattacks. The same can be said of the financial industry.
If a unified platform based on the use of FinTech can be developed toconnect insurance companies, banks, securities firms, and clients to one
another, points of connection among these parties will also increase in number.
The risk of outside attacks could increase commensurately.
Heightened security measures made possible by the evolution of AI
The fact that the risk of sustaining an outside attack through connections isincreasing is a matter of concern. However, efficient and effective measures todeal with outside attacks and internal fraud can conceivably be realized byutilizing AI for information security.
Whatever system is in place is made to learn a white list (list of conditions
for permitting acceptance) through deep learning.
A white list likely contains, for example, information on communications
that is generated through normal operations. If such permitted communications
are listed, communications not included in the list can be blocked to makeirregular communications impossible.
If AI is utilized effectively in this way, it will be possible to automate,concurrent with the identification of intruders as being abnormal, the sendingof commands to block communications at required points and take the proper
responses in the event an intrusion takes place. Consequently, even if new
attacks were to occur, it is expected that they would be dealt with immediately
to enable more robust information security to be established.
With conventional security and antivirus measures, measures are taken after
a system is exposed to a new threat of attacks. This process repeats with the
emergence of each new threat. Improvements are thus fully made throughChapter 5 105

manual intervention.
If AI evolves, however, it should be possible to have security and antivirus
measures taken with much greater speed than can be taken by humans. AI is
expected to play a huge role not just in the area of information-based marketing,but also in the area of security-related matters.
Security measures in the insurance industry
According to information security guidelines put out by the Organisation
for Economic Co-Operation and Development (OECD), information security isdefined as consisting of the following three elements:
C:
I:
A:

confidentiality
integrity
availability

These three elements are collectively known by their respective initials:
CIA. The meaning of each is as outlined below:(i)

Confidentiality: Only people authorized to access information can see thisinformation; people not granted authorization are unable to browse orotherwise access this information.
(ii) Integrity: Information is correct and has not been subjected to tampering.
(iii) Availability: People authorized to access information can always accessthis information whenever necessary.
Among these elements, confidentiality was especially stressed as being
important under the conventional approach taken for information security. In
other words, the safety of information was maintained by ensuring that it was
not removed or released.
From around 2014, however, a series of targeted attacks caused incidents ofcorporate information leaks to trend upwards. Whether there was a need for aparadigm shift in the area of information security thus came to be considered.
In other words, we began to examine a new paradigm for information
security premised on the idea that information is not always for internal use
only.
106

The risks of sales channel changes and information leaks
Broadly categorized, sales channels in the insurance industry consist of
three types: sales by captive agents, sales by professional consultants working
for independent agencies, and online sales.
The channel corresponding to online sales appears to have nearly run its
course, such that insurance products that can be sold online are unlikely toundergo much growth in terms of market share in the future. This means thateither sales by captive agents or sales by professional consultants working forindependent agencies will grow instead.
In light of what we have been seeing in recent years, captive agents will
likely gradually lose their share of the market as they lose ground toprofessional consultants working for independent agencies. Therefore, abusiness model for which it is assumed that independent agencies will beplaying a key role will need to be considered.
Thus, the need to adopt a unified platform will rise in part in order to freesalespersons at independent agencies handling the insurance products ofmultiple insurance companies from having to trouble themselves with the onsite production of documents. This also applies to information security.
When a person in charge of sales at an insurance agency deals with a client,
he or she might sometimes have client information sent to him or her by the
insurance company. This will then be entered into the system before operations
are carried out. Discrepancies in terms of information security-related literacy
are a problem.
For an insurance company, an information leak that actually occurs as
described in an earlier example could cause the Financial Services Agency to
immediately issue an order to suspend operations.
If the leakage of client information causes an order to suspend operations to
be issued, an insurance company could find itself locked out of global financial
markets, since the financial industry is one that is built on a foundation of trust.
The leakage of client information is truly fatal in this context.
Accordingly, financial institutions – of which insurance companies can beconsidered an example – are pursuing and implementing information securityrelated initiatives that are relatively more advanced than they are in otherindustries.
Chapter 5 107

For example, the ban on bringing mobile phones into offices has beencommonly implemented as a shadow IT measure for many years now. A
system of data-less computers, whereby information is fully saved on company
servers such that no data is retained in computer terminals themselves, has also
been proactively adopted.
For these reasons, the risk of an information leak from an insurancecompany itself can be described as being low.
What should be a matter of concern are the security measures in place atinsurance agencies. This issue is possibly the biggest bottleneck to be
overcome when it comes to ensuring information security in the insurance
industry.
This is because IT literacy is not very high at all in more than a few
insurance agencies.
When it comes to insurance agencies, many companies that are not listed in
the first place have been directed by the Financial Services Agency sincearound 2013 to develop an organizational framework and informationmanagement framework (including systems) in accordance with amendments
to the Insurance Business Act.
Specifically, these agencies have been given minute directions on various
different points. For example, they are to have a physical office in actual
existence and formulate operational rules, including those that are applicable toinformation storage locations. For many insurance agencies, proper compliancecan be challenging in one way or another. Thus, IT literacy must be presently
described as being at a low level.
Since salespersons engaged in such operations handle client information,
the risk of an information leakage should be regarded as being considerablyhigh.
In addition, insurance companies themselves cannot control what happens
to client information after it has been provided to an insurance agency.
Accordingly, information security in the insurance industry requires an
examination of what should be done to enable the confidentiality and integrityof information to be secured on the assumption that information will be
released in this way to outside parties.
Specifically, a framework enabling an insurance company to control
information that it manages even after this information is provided to an
insurance agency shall be established.
108

For example, let us say that an insurance company sends Ms. A at aninsurance agency a file containing client information. Naturally, Ms. A canopen this file.
Figure 22 / Examples of security risks in the insurance industry

Employee working
from home

Outsidenetwork

Salesperson

Insurancecompany•Personal information•Confidential information•Operating file

Illicitremoval•Personal information•Confidential information

Head office
employee

Information
management

Erroneoustransmissionof email

Illicit downloading
and more•Personal information•Confidential information•Electronic certificates•Contract information

ClientOutsidenetwork

Insurance
agencyLet us then say that Ms. A attempts to send this information to Mr. B, an
Chapter 5 109

acquaintance who works in the same industry. If, rather than being able to open
this file, Mr. B is met with a reality under which the data sent by Ms. A were tophysically disappear, then the risk of an information leak would decline
dramatically.
Figure 23 / Controlling a data file that has been mistakenly
released to an outside party
Protection is the key premise
Password-less
Designating parties who
can access the fileProtect

Designating the time
period and countPrinting and editing restrictions

Cannot be accessed by a nondesignated person; authorization canbe revised at will at any time.

Automatically deleting the file in
the event of an impropriety
Applying watermarks

Ascertain where the file went

Checking the access log

Trace
Trace through an access log even after
the file has been relinquished

Detecting unauthorized
attempts to access the file
6Checking the work log

Can be erased by the owner of the fileno matter where the file is located

Remotely deleting files

Can be subsequently erased
By subsequently erasing a delivered file,information leakage is prevented

110

Remotely revising authorization

We believe that the insurance industry should apply this level of
information security to itself.
In the above case, the owner of the client information in question is theinsurance company. Even if this client information were sent by Ms. A at theinsurance agency, Ms. A would not be able to control this information. Control
over this client information would be retained by the insurance company.
If such an information security system were to become widespread, client
information would become highly secure in the insurance industry.
The possibilities of cyber insurance
In hopes of improving the speed of business and operational efficiency,
many companies are proactively utilizing cloud services and relocating theirsystems away from conventional on-site environments. (Information systems
have traditionally been held and operated on each company’s own premises.)
These actions also represent a considerable business opportunity forinsurance companies.
The issue that always comes up whenever a company looks into adopting
cloud services is security. In particular, financial institutions tended to be
averse to the idea of saving data in the cloud given the properties of theinformation they handle.
This is because financial institutions have comprehensively regarded the
security level of cloud services to be low due to concerns over information
leaks and, in the case of the cloud, concerns over the fact that data are retainedin data centers situated outside of Japan, uncertainty as to which countries hostsuch data, and the relatively low operating rate and other metrics of service
level corresponding to cloud services compared to on-site environments.
In this connection, cyber insurance was introduced as a means of providing
coverage against the various risks associated with the adoption of cloudservices.
Specifically, this kind of insurance covers the costs of any follow-up
response and recovery efforts undertaken by a company whenever acyberattack or other form of security violation occurs.
The scheme is one in which an insurance company assesses the level of
security, including with respect to solutions for supplementing security as a
cloud-related issue, and in which the insurance company will indemnify a
Chapter 5 111

policyholder if an information leakage or any other example of a security
incident occurs.
As mentioned earlier, the use of AI as a security measure to countercyberattacks that are growing more and more sophisticated all the time willconceivably allow effective, efficient schemes to be developed. Nevertheless, it
should be noted that no risk can be completely eliminated. In this connection,
the use of this kind of cyber insurance will allow the security risks to which acompany is exposed (= management risks) to approach zero without limit.
Figure 24 / Developing an environment in which client
information can be securely exchanged
Up to now

Insurancecompany

Secure system
platform

Insurance
agencySecurity measures to prevent
information from being released
to outside parties
From now on
Security measures premised on
the release of information tooutside parties

ClientIn order to raise the level of client
trust across the entire insurance
industry, an environment enablingclient information to be securely
exchanged shall be provided.

Companies that utilize cloud services and take out cyber insurance policies
in tandem are in fact gradually increasing in number.
We have taken a look at the insurance industry from the standpoint of theprovision of coverage under cyber insurance plans. By redirecting our focus on
the insurance industry in terms of the handling of information and theoperating of businesses, it can be said that the pursuit of business by way of theutilization of cloud services and the development of a secure environment inthis context is an urgent matter.
Specifically, cloud services will be utilized to streamline the routine
exchanging of information with insurance agencies and other stakeholders andreform operations and systems, including those that relate to sales marketing,systems for specifications and application forms, and at-home work.
An information management system under which security measures are112

implemented will be established, and a scheme enabling information to becontinuously controlled even after it is no longer in the possession of its ownerwill be created.
The development of this platform is more important than anything else forthe business of insurance in the FinTech era.

Chapter 5 113

Dialog 1
Tsukasa Sato

Hideki Fujii

President & COO
Pasona Inc.
President & Chief Executive Officer
Pactera Consulting Japan Co., Ltd.

DialogHow digitalization will change the future and the way we work
Tsukasa Sato
(President & COO
Pasona Inc.)

Photograph by Fumishige Ogata

114

Hideki Fujii(President & Chief Executive Officer
Pactera Consulting Japan Co., Ltd.)What kind of future will we be able to see when the integration of FinTech
with insurance is realized?
It may be possible to determine the answer to this question by perusing
examples found in other industries where digitalization has already made gains.
By also taking into account initiatives undertaken by leading companies in
the area of comprehensive services concerning human resources, we will
explore the new future and ways of working that digitalization will bring about
in great detail through a conversation with Tsukasa Sato, President and COO
of Pasona Inc.

What going paperless will mean to businessFujii / In recent years, the term digitalization has come to be frequently
invoked not only in the realm of business but also in our day-to-day lives.
However, I get the sense that most people don’t have a really good idea ofwhat digitalization means when they hear references made to this term.
For example, you might see people who, despite processing information of
all sorts with a personal computer, insist on working with paper rather thandata by printing out inputted information. For some reason, these people dotheir utmost to talk about the future of digitalization. There are probably quite afew people who feel similarly ill at ease.
Pasona Inc., the company for which you are working as President and COO,
has no doubt been exposed to many different kinds of business settings throughits involvement in the dispatching of large numbers of workers as a leader
among manpower providers. In this connection, I would like to discuss thesignificance of digitalization for businesses.
Sato / I personally define digitalization as “the act of applying a digital
approach to everything from start to finish.” The digital approach enables theprocessing of a far greater volume of data than the analog approach of the past.
This is possible by retaining and reproducing every piece of information
through the conversion of this information fully into combinations of zeros andones.
Since all records can be digitalized, the conventional paper-based approachto processing information is rendered completely unnecessary. In other words,
digitalization is equivalent to the notion of going paperless.
Dialog 1 115

Fujii / The same can be said of the insurance industry. You will invariably run
into various situations – not just in the insurance industry but also in thefinancial industry as a whole – where something has to be filled out by hand.
For instance, when a client goes to an independent agency and applies for
an insurance policy, the policyholder will be asked to fill out an accounttransfer form as part of the procedures for transferring insurance premiums
from the client’s bank account. These transfer forms differ from one insurancecompany to the next. Naturally, it takes time and effort to manage these forms.
If, however, these forms could be entirely processed on a digital basis byrendering them paperless, operations would be instantly streamlined for boththe insurance agency and the insurance company.
Unfortunately, there has not been much progress on this point. Thus, thedifficulties that need to be overcome arise from this state of affairs. Perhaps weshould then look at the extent to which digitalization has made gains in the
personnel-dispatching industry.
Sato / At my company, all data – including client data – can be seen digitally.
Written contracts and interactions with clients are all fully digitalized andmanaged through a cloud service. Of course, the same applies tocommunications with expert staff members (dispatched staff members).
By digitalizing all interactions, interactions based on the use of the samedata set in the cloud can be undertaken from anywhere thanks to an omnichannel tool. In other words, the worldview whereby all communications –including single pages of a contract – within a company are digitalized is theultimate example of digitalization.
Fujii / By pursuing digitalization, what will change significantly?
Sato / I expect that the way in which each employee works will change to ahuge extent. For example, my company lends iPhones to its employees. This
allows us to ascertain what each employee is doing as part of his or her job andwhere he or she is situated at any given time.
In this case, an employee could, for example, stay at home to work andwould not have to come into the office. This is quite amazing. If everything
could be digitalized, we would be able to not only reduce paperwork by a wide
margin, but also pursue the diversification of working styles.
For example, imagine that a person working in Tokyo has a parent – eithera father or mother – living alone in his rural hometown. And if nursing care isrequired, the individual faced with a huge turning point in his own life. Most
116

people in this situation would quit their job, move back to the countryside tolive near their parent, and attempt to both take care of their parent and work at
the same time.
Unfortunately, it would not be surprising if someone who moves to thecountryside consequently finds it difficult to secure employment. Despite being
content with having returned home, an individual in this situation might noteasily be able to find a job for which he can leverage his previous career
experience.
However, if digitalization enables all data to be exchanged through personal
computers and smartphones used by individuals, then it should be possible forduties to be smoothly performed via data communications even if you live in asmall remote village. In other words, you can still keep your job even if you
move to the countryside.
Even if you don’t live in a rural location, a person primarily engaged in athome work will be able to eliminate the time required to commute back andforth between his home and his place of work. In other words, a workstyle thatis indifferent to where one is physically situated (teleworking) will conceivably
become more popular as a way in which people work in a society that isundergoing digitalization.
And while the way in which people work will change significantly in thisway, I am focused on the impact this will have on employee evaluations.
If all duties and operations can essentially become subject to a teleworking
approach, raising the level of output quality should become more emphasizedin terms of evaluation standards than the process by which duties are
performed. It is expected that productivity too would naturally improve.
Fujii / On the other hand, I’m sure there are also areas in which digitalizationis harder to promote.
Sato / That is correct. Digitalization can be blocked to some degree in certain
statutorily-regulated industries for example. A typical example is the financial
industry.
Fujii / You’re right. Insurance companies are, broadly speaking, part of thefinancial industry, and some official documents must be paper-based.
The financial industry is subject to the governing authority of the Financial
Services Agency. Before a new financial instrument is released to the public, it
must undergo a check conducted by the Financial Services Agency. The
documents to be submitted at that time are all paper-based. If you were to
Dialog 1 117

simply send documents in digital form to the Financial Services Agency alongwith an email asking politely for a decision on the matter at hand, you will not
be deemed to have carried out the official steps required for the given process.
A formal document must be a paper-based document to which the seal of thecompany has been affixed.
As long as this culture does not change, digitalization in the financial
industry will not proceed with relative ease.
Sato / So it is against this backdrop that you are seeking to press forward withdigitalization in the insurance industry, aren’t you?
Fujii / Yes. While the elimination of paper is, of course, also very important
for the insurance industry as we go forward, I believe that we can truly press
forward with automation in various different respects in the insurance industry.
Using robot advisors, it is sufficiently possible to present a client withimmediate recommendations on which insurance products would be ideal forenrollment. Before we get to that point, however, there are many parts that canbe automated.
For instance, when a client takes out an insurance policy, an examination isconducted to determine whether the client is attempting to take out a policy
without revealing that he has a medical condition. This process takes about aweek to complete. In another example, the payment of insurance money entails
an investigation to determine whether the reason for the claim in question isvalid. This process can typically take about a month to finish.
Insurance policies can be made considerably more convenient for clients
just by automating these processes.
Despite such client-oriented efforts on our part, seeing such initiatives cometo proper fruition is rather difficult in the insurance industry. While this can inpart be explained by the fact that we are a bit out of our depth, we must
recognize that the industry as a whole will not be able to catch up to thedigitalization wave no matter how much time passes unless it first transforms
itself in a big way. There is a very real risk that ours will become a financial
business plagued by the Galapagos effect.
Sato / This appears to be a significant issue.
How people work in a digital society
Fujii / Digitalization does not only bring about positive results. There are also118

negative aspects associated with digitalization. For example, labor…. This
topic has already been discussed by people coming from different perspectives
in all sorts of different forums.
For example, Professor Michael A. Osborne, while engaging in research on
AI and other related topics at Oxford University, wrote a paper in which heconcluded that various jobs – including persons in charge of lending at banks,
sports referees and umpires, real estate brokers, restaurant hosts and hostesses,
insurance examiners, telephone operators, persons in charge of theadministration of wages and benefits, and cashiers – will disappear and thatapproximately forty-seven percent of all jobs in the United States will become
automated.
A report issued by the World Economic Forum on January 19, 2016, assertsthat the rise of robots and AI will lead to the loss of jobs for approximately 5.1
million people across fifteen countries and regions worldwide in the next five
years.
With respect to the digitalization of insurance as well, it should be notedthat significant time and a large number of personnel are allocated in order to
conduct examinations whenever a client enrolls in an insurance plan orinvestigations whenever insurance money is claimed. If these processes were to
be fully carried out by AI, many people at every single insurance company
would end up losing their jobs.
Some people believe that this is why such threatened workers orchestrate
opposition to this trend and prevent digitalization in this field from gaining
much ground.
How do you feel about the intersection of digitalization and people’s jobs?
Sato / The effective jobs-to-applicants ratio stood at 1.38 in September 2016.
The effective jobs-to-applicants ratio is equal to the effective number of jobs
available divided by the effective number of people looking for work. Simply
put, it is a ratio equal to the number of jobs available divided by the number of
persons who would like to work. If the ratio is at one, then there is a state ofbalance between the number of jobs available and the number of people
looking for employment. If this ratio were to rise to about 1.2 or 1.3, then it
would mean that the number of available jobs is greater than the number of job
seekers, in which case the labor market is favorable to those looking for work.
As mentioned previously, it was recently determined that this ratio equals
Dialog 1 119

1.38, which is certainly favorable for people who are looking for work.
That said, 1.38 is a figure that applies generally to the entire labor force
across all industries. The jobs-to-applicants ratio by occupation varies. The
way that we regard this variation is very important.
For example, the jobs-to-applicants ratio for some occupations that relate to
IT or for which a high level of business skills is otherwise required cansometimes exceed two. In contrast, the jobs-to-applicants decreases to about
0.4 for simple clerical positions. In other words, there are many people who
would like to engage in such jobs, such that it can be quite difficult to find aclerical position no matter how hard you engage in the job-hunting process.
Moreover, Japan is currently beset by a shrinking population, which meansthat it is exceedingly difficult to optimally allocate human resources. Indeed,society may even find itself in a situation where it will not be possible toallocate enough people to jobs that truly need to be performed.
For this reason, AI and other such technologies will become necessary.
By using digital technology, jobs that cannot be performed by humans canbe done by machines. In other cases, simple clerical work can be left to AI andother such technologies to allow people who have been engaging primarily insimple tasks to upgrade their skills for the performance of more sophisticatedwork.
For instance, imagine there is a company with a call center at which 100
people are working. The jobs of thirty of these people can be replaced bytechnology to allow them to learn more advanced skills. These people will thenbe assigned to different added-value positions or positions in which creativity
is demanded.
This approach will enable those whose jobs were replaced by technology to
avoid having to become unemployed.
Fujii / When it comes to AI and other such technologies, the focus isfrequently placed on just the efficiency gains to be had, as a result of whichpeople are inclined to obsess over whatever negative image is formed in theirminds of these technologies in terms of the employment-related issues that arelikely to arise. It is, however, important to think about matters that go beyond
such efficiency gains.
While digitalization has hardly made any progress in the insurance industry,
we would like to cultivate data scientists and increase the ranks of optimizable
personnel.
120

Sato / We would also like to get in on the action as it were. There is presently amismatch between demand and supply in the market, due in part to the failureof education and training to keep up with levels of need.
Fujii / I believe that the term data scientist first gained widespread traction inaround 2007. Thus, the position is still a new one and its contents will likely
continue to be defined with greater precision in the years to come. If theposition is regarded as one to be filled by someone who “performs work toanalyze large volumes of data and incorporate findings into feasible businessstrategies,” then it is undeniable that there is a shortage of people who would
be qualified for this position in Japan today.
The United States, however, is five years ahead of Japan, at least when it
comes to IT-related fields. Thus, I believe there is presently the option ofinviting some data scientists working in the United States to relocate to Japan.
What do you think of this proposal?
Sato / While there is probably not much of a discrepancy between Japan andthe United States in terms of the underlying technology, the real differences
reside in how the technology is used.
While it seems that very few transactions in the United States now involvethe exchanging of paper-based contracts, paper is still used in a variety ofdifferent contexts in Japan. If highly skilled workers in the United States are to
be brought over to Japan to work, there will be a need to accommodate all ofthese sorts of different forms in detail before proceeding.
In other words, rather than accept that interactions built on the use of paperbased documents are undertaken in Japan as well, changes will need to be
implemented to ensure that all interactions are fully carried out on a digitalbasis. No progress can be achieved as long as no efforts at unifying this aspect
are made.
At Pasona, we have a huge workforce of experts working for us. For the last
three, four years, we have been applying business process re-engineering(BPR) to all work flows. Specifically, we have sought to categorize what wework with as either data or software. We then endeavor to have our software
updated and the contents of our data analyzed and optimized.
Fujii / While only a part of the insurance industry has undergone digitalization,
any attempt to apply a Big Data approach will hardly yield any results as longas a paper culture remains alive.
In going back to the subject at hand, even business operators invariably
Dialog 1 121

focus on the job losses that would be caused by digitalization and are reluctant
to digitalize the flow of operations. Thus, there is a need to change people’s
thinking to get them to instead understand that digitalization will give rise to
new ways of working.
Sato / I agree. I mentioned earlier that digitalization will change the system bywhich employees are evaluated. However, it will also likely have a big impact
on personnel matters as well.
For example, when hiring someone, you select that person based on certain
reasons, do you not? Since you can fully digitalize these reasons and retain the
results of this process accordingly, you can compare the reasons that wereapplicable at the time a person was hired to his or her current performance five
years or so later. This helps not only to evaluate persons who are hired, butalso to evaluate those who hire such persons.
In addition, the potential that digitalization represents is also huge in termsof the collection and use of data required for the management of health for theemployees. Interest in the health and productivity management among
Japanese companies is also rising.
Fujii / That’s right. At any company whose employees lead unhealthy lives
and tend to get sick easily, it is unlikely that performance can be improved to asatisfactory level. In the years to come, management that also takes this into
account might become important.
If a system that can determine whether a given employee can work in ahealthy state can be constituted by bringing together each employee’s approach
to work in a company, personnel data, and other internal variables, you will
also be able to harness digitalization for the management of health.
Sato / In any case, Japan lags behind the United States when it comes to theways in which IT is used. This is probably due in large part to the thinking inJapan that a mistake or error is wrong. This way of thinking can be seen in thearea of IT as well as in other fields. Thus, people here tend to get flusteredwhen they are attempt to test or try something new.
In contrast, people in the United States sometimes take things too far. Ifthey try and fail, they simply go back to the drawing board. Even if people inboth countries ultimately end up where they respectively began, you might
expect to see Japanese people become mired in the status quo without trying toshake things up and Americans tossed and turned in all directions before
having to start over again.
122

If you had to identify something that was a major point of difference, itwould be the value of experience. You just have to be willing to try different
things and be prepared to start over whenever you fail at a particular endeavor.
Americans who repeatedly undertake this process in various directions
gradually build up experience. The gap in this respect is quite large. By
increasing this value of experience, its application will come to be beneficial.
Fujii / In our discussion up to this point, I have come to understand that theways in which businesses operate will change significantly if the paperless
approach is increasingly adopted due to digitalization.
In the insurance industry, the preference for paper is strong within the
Financial Services Agency. Even when a digitalization tool in the form of theInternet is used to conclude an insurance policy through an online insurancecompany, you should expect to encounter a strange reality in that paper-based
agreements are mandated. However, this too will eventually undergo a shift toa paperless approach, no doubt.
Sato / I agree. The paperless approach will eventually gain ground since partial
amendments to such statutes as the Labor Standards Act are enabling thischange.
Nevertheless, even if the paperless approach is applied to operational flows forwhich paper is currently used, nobody believes that work being performed bypeople will be immediately displaced by AI and that automation will be
implemented overnight. These sorts of things need to proceed progressively.
Even if current clerical work were to be automated, employees actually
performing such clerical work would need to help build a new automating
system until such a system could be launched. Thus, it is simply implausiblethat current clerical positions would be rendered suddenly redundant.
Therefore, since there is still time before those who are presently engaged
in clerical work need to be insecure about losing their jobs due to increased
digitalization, they should think about prioritizing the acquisition of skills forwork that will become needed as digitalization gains more and more traction in
the industry.
Human power that is demanded precisely because our society is a digitalone
Fujii / Can digital systems and human beings exist in a state of harmony?
Dialog 1 123

Sato / Yes, I believe they can. The relationship between the two is one that ismutually inclusive (“and”) rather than mutually exclusive (“or”).
For instance, Airbnb is quite popular now, isn’t it? It’s a service that allows
users to offer or secure private residences that are temporarily taking in lodgers.
The number of positions whose duties involve the taking of photographs to beposted on sites for people leasing lodging facilities and private homes isincreasing.
How should we regard the fact that there are more and more openings forsuch an analog-heavy job involving the taking of photographs for a new
business that has emerged thanks to the growth of a technology-driven
community in Airbnb? I think we should understand that this is where the key
to a style of work that will be required to prevail in the digital era resides.
Some people believe that the appearance of Pepper4 the robot will partly
render superfluous the position of receptionist. If Pepper continues to be
adopted to perform the work of company receptionists throughout society,human receptionists might, on the contrary, come to be better appreciated.
In this way, the emergence of technology will not lead to the displacementof all jobs performed by human beings. I believe that it is more thansufficiently possible for digital systems and human beings to exist in a state ofharmony depending on how we proceed.
While the fear over people losing their jobs to machines may become morewidespread as technology continues to evolve and IT, AI, and digitalization
encroach upon the realm of human employment, I don’t believe that this fear
will actually transpire.
Fujii / As digitalization makes gains, can you draw a picture of what kinds ofworkers will be able to survive?
Sato / I don’t believe that we can definitely say that so-and-so kinds of workers
and so-and-so kinds of companies will be able to survive. However, thosepeople who can work constantly to prepare for the future on the assumptionthat what they are doing today may not be around tomorrow are well
positioned to succeed even as digitalization continues to advance.
In the age of digitalization, the pace of change will increase. Thus, it iscompletely conceivable that what you are doing now will suddenly become
obsolete or that a competitor will emerge to release a better product or service.
4

Pepper is an AI humanoid robot manufactured and sold to the public by Softbank. Pepper canrecognize human emotions.

124

Therefore, you would be advised to refrain from thinking that what you aredoing now is correct or will make you money.
Your current operations can lose their competitive edge overnight. You
must therefore take on new challenges at all times and consistently seek toprovide society with new added values. I believe that this degree of adaptive
flexibility is the condition that must be met for people to survive professionallyin a digital society.
As mentioned earlier, being wrong is okay. The biggest mistake you canmake is to avoid making any moves at all out of a fear of failure. You simply
have to try.
If you then fail, your own experience value will have increased. Just try
anything and be prepared to repeatedly fail. With each failure, you go back tothe beginning. By undertaking this process over and over again, you will
gradually come to understand what is constituted by an optimal product orservice.
You will also need to be able to deal with matters even without a manual.
This is something that I want young people in particular to understand. Whenyou get to be about as old as I am, you find yourself needing a manual
whenever you use something new.
Yet, whether you are using an iPhone or a social-networking service like
Instagram or Facebook, no manual can be found anywhere. In other words, if
you want to use such new digital devices or applications, you need to have thesort of sensitivity that enables you to engage in intuitive usage without everreferring to a manual.
It is important for a company to establish an environment in which young
people in possession of such sensitivity can keep on offering counsel andsuggestions to the company. Failure to do so will prevent the company fromchanging. Companies must recognize that employees who have been with thecompany for no more than three years to date are intuitively capable of usingsocial-networking services and that older employees may not be able to do so
without referring to manuals.
Fujii / I believe that it’s likely that robots will come to perform quite a lot ofwork in place of human beings. When we ponder what human beings should
do in this context, we will probably conceive of some interesting ideas andrevert to the kind of human power that can be put into action.
Sato / You’re right. After all, what makes us human is the ability to come up
Dialog 1 125

with new solutions.
Fujii / In looking just at Japanese people, I believe that it is important tocultivate a tolerance for change. It is to this extent that Japanese people today
are weak in the face of change. Even if the world becomes highly convenient
for people as digitalization continues, everyone refrains from doing anything
because information security will become an issue, and sustaining their current
job will become difficult.
As we saw when the Individual Number Card system was introduced,
people are overly wary of security matters in a way that is puzzling to me. Of
course, security is important. However, concerns over this issue in Japan are
excessive. This attitude will impede the natural course of evolution in this area.
Sato / From my own perspective gained over many years of living in the
United States, I do wonder whether it might not be better for Japan to retain
this approach. The country possesses the world’s most advanced technologies,
which in turn allows society as a whole to operate remarkably well.
In the United States, Trump emerged on the scene and caused a whirlwind
to rage for nearly a year during the campaign to elect the forty-fifth presidentof the country. At the end of the day, overwhelming favorite Hillary Clinton
lost to her opponent. This sort of thing almost never happens in Japan. That
this kind of phenomenon occurs is something that makes America both better
and worse.
If I had to identify a shortcoming associated with Japan, however, I would
say that it is the inability of Japanese people to recognize the ways in which
their country is exceptional. If this shortcoming could be ameliorated, I believethat Japan can change more dynamically in the years to come.
Fujii / And you can’t necessarily say that a methodology that works overseas
can be applied in Japan without modification. While some might say thatJapanese people tend to be averse to change, venture companies are constantly
being cultivated. If Japanese people really hated change, you would not expect
to see any venture companies.
For myself, I would love to work with anyone who knows what he or she
wanted to do, who is highly motivated, and who is bold enough to continue topush forward in his or her endeavors.
Sato / It’s been about nine years since I arrived here in Japan. Until about four
years ago, I was firmly under the impression that Japan was a country thatwould not change. In the last four years, however, various examples of change
126

have emerged in this country. One example is, as you mentioned earlier, theemergence of one venture company after another on the scene.
I believe that Japan is beginning to steer itself onto the right track. This has
been made possible thanks to structural reforms facilitated through the gradualaddition of people who have learned the ropes in business settings for foreigncompanies to the ranks of upper management at Japanese companies. I believethat this has allowed the pace of change to increase.
Digital marketing is an example of a word-of-mouth culture
Fujii / Digitalization will change the operational flow of business and the ways
in which people work. Moreover, while the impact of digitalization on work ingeneral will be extremely large given the changes that will affect the standards
by which employees are evaluated, digitalization will also affect the strategies
by which products and services are sold and, indeed, the entire field of
marketing. What are your thoughts on this topic?
Sato / The distance between consumers and companies will likely change. Up
to now, marketing has been undertaken in accordance with the voices ofcustomers. This seems like an obvious principle, one that involves collecting as
much feedback from customers as possible for use in the development of goods
and services.
The coming age, however, will see marketing undertaken in accordancewith the voices of friends. In other words, word-of-mouth communications
among close acquaintances and friends will affect sales of goods and services.
You can try thinking about this in terms of your own perspective. You
probably have around thirty to sixty people with whom you are close. If any
one of these close friends or acquaintances were to say something like “Thatwas delicious,” “That movie was fun,” or “This product is user-friendly,” thenhe or she would be exerting some sort of influence on the buying behavior ofothers in his or her circle.
Thus, marketing in the age of the voices-of-friends principle will turn on
how effectively word of mouth can be utilized.
This is why many companies have been attempting to deploy digitalmarketing programs based on the use of Twitter, Facebook, Line, or other suchsocial networking services in recent years. In the years to come, we willprobably see new products and services developed in accordance with posts
Dialog 1 127

made by people on various social networking sites.
Is marketing based on the use of social networking services being practiced
in the insurance industry?
Fujii / The insurance industry has definitely gotten off to a late start. This isbecause insurance products remain subject to strict monitoring by the Financial
Services Agency, such that new products cannot be released without first being
approved by this body.
For example, there is a product known as risk subdivision-type insurance.
For automobile insurance, the premium and discount rates for the premium tobe paid are determined in accordance with the given class, whereupon thepremium to be paid is calculated accordingly. For risk subdivision-typeinsurance, the premium to be paid can be further broken down according tonine different standards: the driver’s age, the driver’s gender, the driver’s
driving history, the purpose of automobile use, the state of automobile use, thedriver’s region, the automobile classification, whether the automobile isoutfitted with safety devices, and the number of automobiles owned by thedriver.
This is an accepted form of insurance when it comes to automobile
insurance but not for life insurance. The elimination of such a particular
restriction will increase the degree of freedom that can be applied to thedesigning of products and services and allow the voices of friends to be taken
into account in the process of developing new products that meet more specificclient needs.
Sato / It appears that finance in Japan is still subject to many restrictions. Whatis the situation like in the United States?
Fujii / I believe that the situation is quite progressive overseas.
Sato / Do you have any specific examples?
Fujii / When you cross insurance and technology overseas, you get somethingthat is referred to as InsureTech. Various different insurance services haveemerged in this category.
For example, telematics insurance is a system under which all sudden
braking actions, sudden start actions, sudden lane-change actions, and othersuch incidents are recorded using measuring instruments installed on thevehicle and under which premium rates are then determined according to thedriver’s driving profile. The calculation of premiums based on the use of Big
Data for automobiles can be described as the perfect example of what can be128achieved through the fusion of FinTech and insurance that has been undertaken
in recent years.
There is also a type of life insurance that works by assessing the state ofhealth of the policyholder with the use of a wearable terminal. A policyholder
who is determined to be leading a healthy lifestyle will be issued tickets
granting him or her the right to receive various forms of medical treatment as
an incentive.
A product known as P2P insurance has also emerged.
For this type of insurance, the scheme involves the creation of a group – forexample, of family members or colleagues at work – and premiums would be
paid on a pooled basis. If an event for which a small amount of insurancemoney can be claimed occurs, a portion of the pooled money would be used. If,
however, an event for which a large amount of insurance money exceeding theamount of money that has been pooled occurs, the excess amount claimed
would be settled through the payment of insurance money by an outside
insurance company.
Sato / I see. Despite still being constrained by restrictions imposed by the
Financial Services Agency, the Japanese insurance industry will invariably
become liberated if FinTech and insurance are merged together andadvancements in digitalization are achieved. The process by which
digitalization will be promoted serves as the driving force behind efforts toovercome conventional wisdom in this industry and allow new products andservices to be brought forth.
Fujii / I agree. Thank you very much for sharing your thoughts with me today.

Dialog 1 129

Dialog 2

Conversations with the authors
Tadao
Matsumoto

CEO
Digital Arts Consulting Inc.

Hideki Fujii

President & Chief Executive Officer
Pactera Consulting Japan Co., Ltd.

Dialog
New trends in FinTech. What kind of consultant will significantly change
the insurance industry?

Hideki Fujii
President & Chief Executive Officer
Pactera Consulting Japan Co., Ltd.

Photograph by Hideji Umetani

130

Tadao Matsumoto
CEO
Digital Arts Consulting Inc.

Hideki Fujii is forty-five years old.
Tadao Matsumoto is thirty years old.
Easily a generation apart in terms of a typical corporate structure, these two
management consultants have begun a project to significantly change theoutdated insurance industry.
FinTech x insurance = ???
What is the response to be derived from this formula? Indeed, what caused
people to conceive of the idea of merging FinTech with insurance in the firstplace?
Let us seek answers to these questions through a conversation between both
authors of this book.

Theme / Background of both authors
This is how we defined our own place in the consulting industry.
Personal interactions are important in developing a workforce of winners
Fujii / Broadly speaking, I have been involved in three areas to date. The firstwas IT. My career began when I joined a major domestic think tank.
When you think of think tanks, you probably ostensibly think of the work
they do conducting macroeconomic and financial market analyses, making
policy declarations, and carrying out research for individual companies. In fact,
however, their biggest source of revenue might lie in the field of IT, which
includes system-development work and other such functions.
In the year before I graduated from university, Microsoft released Windows
95. I became interested in the field of IT and decided to enter the world ofsystem development. My second career was as a management consultant while
my third will be tied to an insurance company.
Matsumoto / For me, it’s been eight years since I graduated from university.
(Note: this conversation was held in 2016.) I’ve been building up my career inthe consulting industry ever since my graduation.
I’ve always wanted to help companies solve their problems and contributeto the growth of companies that I call my clients and aspired to become aconsultant who could provide support in the area of strategy. For the first two
and a half years, I was engaged in work in the field of IT. I backed up
Dialog 2 131

corporate activities by making various proposals. For example, I might pointout the need to apply certain specifications to email servers or file servers as acompany worked on expanding the scale of its business. Or I might suggestthat a data model and system for achieving such a model should be constructeda certain way to have a management accounting system utilized more
effectively.
Since I really wanted to engage in consultations in the area of strategy,
however, I continued to submit field transfer requests while performing myday-to-day tasks.
Fujii / But wasn’t it quite difficult to become a strategic consultant?
Matsumoto / Yes, it was. As you are aware, it’s a field that’s highly meritbased for those who work in it. Thus, I worked hard at that time to make mysuperiors, who held the power to shuffle personnel, understand that I was
highly qualified in a professional sense on the basis of my own merit and toearn their trust.
That said, it’s not an easy job to crack. After I started working, it was a real
struggle until I managed to snag a job in my desired field. Since the job itself isalso quite hard, you are required to have the physical and mental tenacity to beable to work not only overtime, but also overnight at times for the benefit ofyour clients. Thus, you have to really enjoy being a consultant, and you have to
be extremely motivated to work in your chosen field. These are absoluteconditions that must be fulfilled if you aspire to be a consultant.
Fujii / When we first met, you had already developed the look of someone
who was clearly a strategic consultant. (Laughs) What prompted you to switchfrom being an IT consultant to a strategic consultant?
Matsumoto / I have to say that I switched because of my boss. I had a boss
who was from a strategic consulting firm. He’s the one who gave me a boost
and helped mold me into the consultant that I am today.
The first consulting firm I joined was a Japanese consulting firm. I worked
there for five years and spent the last two and a half years with them fulfilling
duties as a strategic consultant. In the last half year of my time working in thestrategic field, I met you when you were a COO for a certain life insurancecompany back then.

132

The difficulties and joys of dealing with an organization (as related by a
CEO who stepped down from his position out of weariness at seeing eighty
percent of his work consumed by meetings)
Fujii / If I were to talk about my career to date, it would get a bit complicated.
(Laughs)
At first, I belonged to a major domestic think tank. I then worked for two
foreign-affiliated consulting firms before joining a foreign-affiliated insurancecompany. This company underwent a number of name changes and corporate
acquisitions, during which time I was transferred to a given insurance company.
This company was in turn bought out by another entity, which purchased aforeign-affiliated insurance company to which I belonged for several months. I
subsequently made my way to another foreign-affiliated insurance company,
where I worked for a year and a half.
Through these twists and turns, I found myself at a certain life insurancecompany where I met you. I was able to survey the entire company from myvantage point as a COO.
This was the first time I was able to survey an entire company from such a
position and take up a post as a board member in the company. I amassed quite
a bit of positive experiences, but – and I suppose this is just something thatarises from my own personality – I eventually felt the urge once again to takeup a new challenge. (Laughs) I submitted my letter of resignation from thiscompany after ten months working there and signed up to work for a foreignaffiliated accounting consulting firm.
Matsumoto / After you resigned from a certain life insurance company, youestablished an insurance team at a foreign-affiliated accounting consulting firm.
It was at this time that you contacted me and invited me to join you.
I was able to work together with you for about a year and a half. To behonest, I felt propped up just by the fact that the team was led by you. For thisreason, I wanted to test myself to find out just how much I could do on my own
and found employment with a different foreign-affiliated consulting firm.
Fujii / I chose that foreign-affiliated accounting consulting firm because I
thought I would be able to perform my job with freedom, given that it was
relatively new among the four big accounting firms in existence at that time. It
was after I joined the firm that I realized that it was quite a politically-charged
organization.
Dialog 2 133

The culture was one in which people felt that consultants should simply
stick to consultancy-related tasks and in which territory was fiercely protected.
There was an implicit understanding that you had to pay your respects toanyone when performing tasks that intersected his or her sphere of influence.
While I was able to immediately produce results with respect to insurance
and become a top executive in the finance division, factional fighting began
immediately. It was then that, while feeling disillusioned about this situation, I
was invited to come join Pactera. It is for this company that I am currently
working.
Theme / Changing jobs
Changing companies is not the same thing as changing jobs. Find a job andchange jobs in order to customize your own career.
Is changing jobs in the consulting industry the same thing as a personnel
shuffle?
Fujii / Honestly, I have zero resistance to the idea of changing jobs. (Laughs)
The major domestic think tank that I joined as a new employee is now a huge
enterprise, but I have never once thought of committing myself to lifelong
employment.
I chose that company because I felt that IT would be important given theprevailing societal trends and believed that they offered me the quickest andeasiest route to studying this topic.
My career goal is to run a business on my own and to create an organization
where I can freely do what I want. In this context, repeatedly changing jobs is aprocess by which I can pursue my goal while remaining true to what I aspire to
become. Where necessary, it is simply a process of changing companies.
Matsumoto / When changing jobs, one might be invited to do so by aheadhunter. Have you ever had such an experience?
Fujii / Only in the form of a referral. I’ve been contacted by a headhunter but I
have never actually changed jobs in accordance with conditions presented by aheadhunter.
What’s interesting is that, despite repeatedly changing jobs as many times
as I have in my life, the right company appeared at the right time or I’ve been
given proper guidance by someone at the right time in each and every case. I
134

reckon that it is likely that I subconsciously took actions in line with my desire
to create, as quickly as possible, an environment in which I could do what I
want pursuant to the goal I set for myself.
The consulting industry is an industry in which people steadily transferfrom one place to another within the same sector. Even if someone changes
companies, his or her tasks will not change to any significant degree. Thus, I
believe that many people believe that changing jobs is something akin to apersonnel transfer.
In my case, I went from the IT sector to the world of consulting. I joined aninsurance company along the way and returned to the consulting sector. In thisway, my career has been somewhat different from the careers of otherconsultants. My thoughts on changing jobs, however, are the same as those ofother consultants. Not surprisingly, I feel that changing jobs is rather likeundergoing a personnel transfer.
Consultancy can be likened to a business managing television personalities
in that a job change in this field will give you more leverage for opening
up paths
Matsumoto / What do you keep in mind when you change jobs?
Fujii / What I am about to say is actually true. Each time I change jobs, thelevel of discretion I enjoy is raised. I am currently employed as a company
president. Therefore, I need to be mindful of the strategies of our parent
company and other group companies, but I am otherwise essentially free to dowhat I want. In essence, my goal is to become independent. This is because I
want to possess full discretionary powers for myself.
Incidentally, why did you want to work as a strategic consultant?
Matsumoto / Just like you, I wanted to go into business for myself. In otherwords, this entailed becoming a company president. When I sought to work
alongside more company presidents, I felt that this probably involved working
as a strategic consultant. Thus, I persisted in requesting jobs that allow me toengage in strategic work.
However, I knew that it would be difficult to do this with my capabilities at
the time. For the first two and a half years then, I strove to firmly deliver
results through work that was assigned to me and reach a position in which I
could express myself and have myself heard properly within the company.
Dialog 2 135

I somehow delivered these results and was given my opportunities. I was
asked to partake in a consulting project to ameliorate operations. This project
was supposed to lead to strategic openings down the line. Let’s just say that it
all felt like a struggle to the death. I worked hard to define the value that myjob and my own existence provided to others and endeavored to take advantageof the opportunities that lay within my grasp.
Fujii / At this point of your life, you’ve changed your job many times to datebut have you ever had any resistance to the idea of changing jobs?
Matsumoto / Since I’ve never had a job outside of the consulting industry,changing companies feels a lot like personnel transfers, as you mentioned
earlier. For this reason, I’ve never been opposed to the idea of changing jobs orcompanies.
There are two reasons why I have repeatedly changed jobs up to this point
in my life.
The first is to assess where I currently stand.
For example, let us say that you are working as a manager for a certain
consulting firm. To be evaluated in this position is to be judged by yoursuperiors, colleagues, and subordinates in the company to which you belong.
Changing jobs can be meaningful in that it would allow you to find out
whether you can be evaluated similarly once you leave your company and seek
a position elsewhere.
The other reason is to further assess my field and change jobs for personal
growth, in order to move from where I currently stand to somewhere else
where I might be better positioned to meet my goals.
In one sense, consulting can be likened to a business managing televisionpersonalities in that being evaluated by people is a huge part of this field.
Therefore, changing jobs is necessary to assess your own strengths asdemonstrated independently of any association with a company and to
objectively identify any shortcomings that may impede the attainment of thegoals you wish to fulfill next.
An intense desire to run a business is necessary in carrying out the duties
of a company president
Fujii / I come from a full-time farming household. Because my parents are
self-employed, they are, in a sense, living freely. Of course, they engage in136

farming as an occupation, but they find time to go to nearby rivers and theocean to fish when they are in the mood. As their child, I see them as freespirits.
Thus, I could not see myself leading a life for which I would have to engage
in certain determined tasks during certain determined hours for a large
company as a member of its workforce.
For this reason, I felt, if anything, a strong urge to operate a business. It’strue that I am currently working as a company employee, but I retain a strong
sense that I am studying for the purpose of eventually running my own
business. It may be a radical way of thinking, but I don’t think it’s anexaggeration to say that I was put here on this earth to run a business.
Why did you want to run your own business?
Matsumoto / My family was typical in that it was led by a salaried corporate
employee, but we weren’t all that well-off. My desire to run my own businesscan probably be primarily attributed to this aspect of my background.
This might be a truly simple way of looking at things, but I pondered what I
needed to do to make money and came to the conclusion that company
presidents probably make lots of money. What’s more, if a business I launchedwere to be recognized and valued by society, then my company could continue
to grow into something big.
Consequently, I too would profit in such a situation. I’ve had this way of
thinking ever since I was a child.
I understand now that society is not that simple. Nevertheless, I believe thatmy childhood thoughts continued to hold sway in some part of my brain until I
eventually became appointed to the position of company president.
Thus, I aspired to become a strategic consultant after considering what I
needed to do to engage in work within the innermost circle of a company
president.
Fujii / So you found employment eight years ago (editor’s note: it is currently
2016) – so that would make it 2008. That was when the Lehman Shockoccurred. At the same time, numerous Internet companies emerged both inJapan and overseas. Were you also influenced by what was happening backthen?
Matsumoto / Back then, venture companies appeared to be more dynamic thanlarge companies. Since I felt a greater bond of kinship with entrepreneurs – inparticular those in the Internet sector, I believe that the events that were
Dialog 2 137

unfolding then influenced me greatly.
Theme / The joy of working
How should we face our work?
Wanting to create an organization in which people can be excited about
working under a philosophy of knowledge, fondness, and enjoyment
Fujii / Why do you work? This is an element of the managerial creed adopted
by Pactera Consulting Japan, the company that I serve as its representative. I
like to think that this question is being posed as a way to encourage people towork in order to enjoy life.
Thus, we embrace a philosophy of knowledge, fondness, and enjoyment.
A job first entails the acquisition of skills (knowledge). This will allow you
to master your job. As you repeatedly work hard to perform your job, you will
gradually come to like your job (fondness). Moreover, while it is important tolike your job, the ability to enjoy your work is an even more powerful factor(enjoyment).
The philosophy of knowledge, fondness, and enjoyment is one that appears
in the Analects of Confucius. If you could create an organization that manages
to fulfill this philosophy, there is no doubt that working for such anorganization would be wonderful indeed. It is for this reason that I seek toenjoy my work. It is on this basis that I hope to see the members of theorganization I create be capable of enjoying their own work. This will, in turn,make work even more fun.
To describe this as a hobby might rub some people the wrong way but it is
my desire to create an organization in which people will be able to work as if
they are pursuing their favorite passions. To this end, I have gathered together
colleagues with whom I can work in a joyful manner at Pactera Consulting
Japan.
Matsumoto / It’s been only eight years since I started working, but, in part due
to my many years of working for the consulting industry, I believe thateverything I do no matter how far I get should be for the benefit of clients.
For example, let us say that the company you join as a consultant is a major
enterprise teetering on the brink of bankruptcy with an operating profit marginof one percent. In hopes of turning things around, you have to work out some138

measures. Since you don’t really have a year to conceive of such measures, you
are required to propose convincing measures to the president of the company injust one or two months. You find yourself working so hard you hardly have
any time to even sleep. I believe that you will then be wondering once again
why it is that you work.
If you are just working for your own benefit, you will probably cut corners
at some point. However, if your client is a large company with a workforce ofseveral tens of thousands of employees and the fate of these employees rests on
the quality of measures that are being studied with your help in your role as aconsultant, then you will need to be fully committed to conducting yourself forthe benefit of your client.
Of course, since consultants are essentially high-income earners, aconsultant is liable to think of himself or herself as an outsider and might betempted to work for his or her own benefit. However, if you think about it very
seriously and at a very fundamental level, I believe that this is not the kind of
job you can continue to engage in for very long if you fail to work while firmly
maintaining a client-focused orientation.
The joy of working comes from love and money!
Fujii / As you might expect, work is not something that you can continue toengage in if there is no joy in it somewhere. As you mentioned earlier, thenotion that you are working for your clients is possibly appreciated by yourclients and might be a source of delight for your clients.
Matsumoto / That’s true. What is it about work that makes you happy?
Fujii / I work for two different goals. The first is to work with heart and soul. I
must deal with both myself and my clients at all times with a wholehearted
attitude and in good faith.
The second is to become aware only through practice. This is one of the
propositions of neo-Confucianism in China, according to which knowledge andpractice are inseparable actions that arise from the ability to judge between
good and evil and between right and wrong.
Simply put, this is a notion that stresses the value of studying hard togenerate actual results. I believe that this is an exceedingly important quality
for a consultant to possess. By engaging in work with this mindset, you willfind yourself adhering to the aforementioned philosophy of knowledge,
Dialog 2 139

fondness, and enjoyment and should be able to better enjoy your work.
What I have recently come to believe is also important is love.
An organization brimming with love. You might be reading this andwondering, “What the heck is this?” Nevertheless, it is very important. In brief,
persons belonging to a given organization should help one another out. In
addition, an organization should offer to help its clients. Behind every act ofassistance, love for the intended recipient of the assistance is required in myopinion.
Leaving aside the question of how we can get love to permeateorganizations, the successful creation of an organization that is brimming withlove would represent a truly wonderful achievement. If such an organization
were also fully capable of making money, the joy of working would be felt byconsultants and the head of the organization alike. This would represent
nothing less than the essence of love and money.
Matsumoto / That’s really interesting!
Fujii / When it comes to love and money, it is really important to strike theright balance between love and money. To create such an organization, I havebeen carrying out an extensive process of trial and error over and over again.
Thus, if I were asked to explain what it means to enjoy one’s work, I would
respond by indicating that it is the process of trial and error that is carried out
with a view to creating an organization capable of making love and money areality.
In the consulting industry, there is a real problem. For example, if you
asked some young employees working at a consulting firm if managers arepeople that can be respected from the point of view of these young employees,
most would probably say, “No,” and proceed to explain that, in their view,“Managers essentially treat us like we are disposable.”On the other hand, if you were to ask managers if they believe that theirsubordinates are effective employees, then eight or nine out of ten managers
would say, “No,” and then demand to be provided with better subordinates.
But hold on… If you were to then ask these managers if they defend andprotect their subordinates, they would probably say something like, “There’s
no way I would defend and protect such subordinates.” This is the consulting
world in a nutshell.
Since consulting firms attract only the best and the brightest in terms ofeducational background, there is no shortage of immodesty among the140workforce. This accounts for the occurrence of truly peculiar conflicts.
Since consulting firms are a collection of exceptional talent, managers tend
to believe that their subordinates will simply develop on their own. In otherwords, subordinates are not meant to be the recipients of feelings of affection.
As a result, even subordinates who are recent graduates are often seen as rivals
by managers. Thus, this is something that I would like to change.
Converting one’s circle of colleagues with whom relationships have been
formed through projects into a significant asset
Matsumoto / Can you strike a proper balance between love and money?
Fujii / In a word, I do wonder if it’s possible to develop a money-making
scheme under which love for the organization is promoted. For example, is it
possible to develop a scheme that provides greater incentives for those inmanagerial positions to defend and protect their subordinates?
To be honest, I don’t have anything yet that is functional, but I would liketo make this a goal. It sounds extremely difficult as a concept for thedevelopment of an organization, but nothing easy is fun. It’s really only
enjoyable when the challenge is difficult, as they say.
So where do you find the joy in working?
Matsumoto / I can point out three sources of joy in working.
The first is the attainment of a goal.
Since a project is constituted when you have a goal, the attainment of thegoal in question is important.
Of course, there will also be times when you won’t be able to attain the goalat hand. You will still be paid as a consultant even if the goal is not attained,
but it is at these times that you are overcome by a feeling of impotence. To
illustrate, let’s say that you spend three months on a project that ultimately
results in failure. It’s great that you receive payment for business services
rendered, but, not surprisingly, you will be left wondering if there was any
point in working so furiously for three months.
At the end of the day, I believe that there can be no joy in working unless
you meet some kind of identified target or goal.
The second is any opportunity for increasing the ranks of friends andcolleagues.
I always have friends and colleagues with whom I associate through good
Dialog 2 141

times and bad, but they aren’t always going to be working for the same
company, since anyone who works in this industry will be constantly changing
jobs. Nevertheless, I still regard members with whom I once struggled on thesame project as friends and colleagues, even if we are now employed bydifferent companies. This can be said with respect to not just other consultants,
but also client-side people with whom I have previously collaborated.
Since problems are ultimately solved not by consultants working alone but
through work that we as consultants perform together with client-side members,
these client-side members also become friends and colleagues, in a sense, aspart of an ever-widening circle. This is truly a remarkable source ofgratification and something that I see as being an asset that I personally own.
Fujii / And what is the third source?
Matsumoto / I’d say that I also embrace the joy in working whenever I makenew discoveries.
To begin with, since I can address new problems all the time, I simply don’t
declare something to be the optimal solution to a given problem. It is precisely
for this reason that a consultant will continue to make new discoveries if he or
she goes all out and earnestly engages in new problems. I believe that thisgives rise to joy in working.
Theme / How to overcome setbacks and barriers
What skills are needed to resolve significant issues?
When a project costing several tens of billions of yen is postponed oraborted prior to completion
Fujii / You mentioned that some goals can be attained while others cannot. It’strue that, if you’ve been working for many years as a consultant, you will haverun into various walls along the way.
In my case, as I indicated earlier, my parents are farmers, which means thatthey are essentially pretty laid-back people. They don’t have the same
temperament as people of Mediterranean heritage but they definitely exhibit areal “easy come, easy go” attitude.
This is why, if I’m being honest with you, I can’t take things too seriously.
It’s true that you might run into a few walls while you work. However, if you
take a big-picture approach, you might find that most issues constitute nothing142

more than exceptionally small problems affecting groups within a given
business enterprise.
Also, seeing something from a different perspective could cause something
to be seen in a very different light, depending on the skills of the given
consultant.
In my own experience, the more critical a certain juncture is or the moredifficult a certain situation is, the greater is the opportunity that is presented.
Thus, I try to regard crises optimistically as opportunities.
Matsumoto / I’m the opposite. It is precisely when a project looks like it’s notgoing so well that you should be demonstrating renewed vigor and grit.
However, you should ultimately maintain an attitude of sincerity when you getto the very end.
There aren’t many projects that go exactly according to plan. I canunderstand why a client might want to direct their anger at consultants when aproject they’ve been working on as a matter of survival fails.
Thus, by demonstrating sincerity in your efforts to get as close to 100
percent as possible even when perfection is not possible, you will be able tosomehow overcome whatever walls you encounter.
Incidentally, what sorts of critical junctures have you come across to date?
Fujii / Let me give an example while redacting the name of the company so as
not to inconvenience a number of different parties. There is a project involving
system integration for an insurance company. This project, which nobody inthe industry believes will ever be completed, is currently ongoing.
I’m not personally involved in this project, but I was involved in a similar
project many years ago. For this project, a certain consulting firm boasted thatit could meet the given objectives in a year. I was added to the project team asa project manager partway through the term for this project.
Unfortunately, however, a comprehensive look at this project revealed that
there was just no way that it could be completed in a year. In the end, we
endeavored to supplement the budget for this project, which initially stood, on
the assumption that it would take a year to complete, at approximately ten
billion yen, with twenty billion yen in additional funds and secure a two-year
extension. With the occurrence of the Lehman Shock in 2008, this project was
ultimately canceled.
This was a project that was begun without properly studying the various
potential risks that would have been exposed as obvious if specific points had
Dialog 2 143

been logically considered from the outset. Regardless, while the consulting
firm that boasted that this project could be completed in a year deserves to be
blamed, the plan that was originally put forth by the consultant in this case wasbacked by many people. Anyone voicing concerns or objections was subject tomerciless bashing.
At that time, I engaged in underhanded dealings to recruit opponents asallies and managed to extend the project term. Suffice it to say that it was just areally bad project.
What is important is determining how you can offer added value that only
you can provide
Matsumoto / On the other hand, some projects must surely have gone well.
Fujii / Some projects, despite being likewise difficult, also wrapped up in a year.
At such times, a top-down management approach was thoroughly applied, whichmeans that top management was properly committed to completely eliminatinginternal politics from the mix.
Ultimately, the biggest factor behind the failure of system-integration projects isthe fact that so much focus is being placed by everyone on internal politics.
For example, let’s say that we are trying to merge Company A’s system with
Company B’s system. Naturally, both companies want something different.
While the goal is to make bold cuts through this process of integration, neitherside is willing to concede. If system integration is to take place, you will need toproperly determine the extent to which actions will be taken by defining thescope of such actions. Since the scope of actions to be taken will vary according
to internal politics, the key to success lies in your ability to manage this and otherpertinent matters.
Now if you were to attempt everything, you would most likely end in failure.
While this might, in one sense, be considered unfortunate, a consultant will makemore money the more the scope of his or her project expands. Each time
discussions are held, both sides will produce various documents in hopes ofdetermining why different things are possible or not possible. Every time thisprocess is undertaken, the consultant will earn fees.
Matsumoto / This might very well be a negative aspect of consultants, but it isfor this very reason that I am constantly aspiring to establish a consulting firmthat can provide new added values without being affected by this negative aspect.
144

Theme / About projects in which we are currently engaged
Why are we currently focused on the idea of combining FinTech with theinsurance industry?
Two highly specialized companies form a team in hopes of changing
traditional society
Fujii / The operations that we are engaged in can be broadly divided into threeareas.
The first is consulting. Now, I might call it consulting, but it’s reallynothing more than a foot in the door, beyond which I want to focus on how we
can establish businesses that offer something extra.
For example, we are currently endeavoring to operate an insurance agency
and establish a platform for the insurance industry by taking advantage of
insurance consulting as our foot in the door.
Second, while we overwhelmingly seek to become the leading consulting
firm in the insurance industry, we will nevertheless be establishing other pillars
that we believe are also important.
For instance, consulting that would place us smack dab in the middle ofmanufacturing operations would be impossible, given our lack of track recordor personnel in this area. However, let us say that we were to propose a reviewof the insurance system as operated by the human resources department of amanufacturing enterprise. We would then certainly believe that we are better
than any other consulting firm in this respect.
In this way, we seek to break into other industries by basing our services ona foundation constituted by insurance.
The third is venture capital.
We picture ourselves having consultants attached to pre-listed companies
where they will engage in hands-on investment activities while assisting withthe listing process.
Matsumoto / We are primarily engaged in the consulting business, and the
product-sales business but are thinking about establishing an insurance
business as well.
Our consulting business is made up of two service operations. For the firstone, we provide a security-consulting service while utilizing the assets ofDigital Arts, our parent company. The other broadly consists of an IT
Dialog 2 145

consulting service whereby everything from the formulation of businessstrategies to support for corporate reorganization through digitalization for therealization of such business strategies are undertaken for clients. We deal withmany cases of digitalization – especially in the field of marketing – based on
the use of IT solutions.
The product-sales business is the other business in which we are engaged.
This business mainly involves the selling of security-related products. For the
insurance business we are slated to establish, we are thinking about dealing
with cyber insurance policies.
To begin with, not only is security-related consulting itself exceedingly rare,
but security manufacturers typically engage in consulting activities while
promoting sales of their own proprietary products. In contrast, we may have
our own company name in Digital Arts, but we engage in consulting activities
from a neutral position and are thinking about going in a direction in which wewill also be dealing with the products of companies other than Digital Arts.
In the medium term, we wish to proactively develop security-related
consulting services for global companies by taking advantage of the global
offices of Digital Arts, which are situated in Singapore, London, and Silicon
Valley. Ultimately, our goal is to go public.
Fujii / In our case, we are considering a model that commits us to investing incompanies and taking them public rather than going public ourselves.
Consequently, we will be earning revenues and also acquiring human resources.
There are many different kinds of consulting firms. As far as I know, there
isn’t a single consulting firm that is currently trying to create suchopportunities.
Matsumoto / In order to promote the growth of a company, it is important toensure that your company can be trusted and accepted by clients. To this end,
we will of course engage in a consulting business and product-sales business aswell as a business involving the handling of cyber insurance, but we are also
thinking about developing other businesses.
In this sense, we would like to work with those who wish to establish theirown businesses.
Fujii / Moreover, the Chinese market will also come into our field of view.
Since Pactera is a Chinese-affiliated company, our circumstances will give us
easy access to this market. It goes without saying that China is a market that is
growing at an exceptional rate.
146

While the Chinese economy is not posting double-digit growth figures as it
once did in the past, rates of growth that are clearly higher than they are in
Japan and elsewhere continue to be maintained. The ranks of the wealthy arehuge. Thus, I’d like to create a scheme by which quality Japanese goods can beselected and sold to wealthy consumers in China.
At the same time, Chinese merchandise can be brought to Japan and soldhere. At any rate, our positioning as a company that is capable of taking
advantage of the human networks and infrastructure found in high-growth
China can also be considered a competitive advantage for us.
Theme / With what kinds of people would you like to work?
People who can engage in exciting work and those who cannot.
Those who can survive in the future will be those who can create jobs that
do not currently exist
Matsumoto / Both your Pactera Consulting Japan and my Digital Arts
Consulting are relatively new firms in the consulting industry. We are both at
the stage where we will be adding to our respective workforces. What kinds of
employees are you looking to hire?
Fujii / Not surprisingly, we want to create a unique kind of business model thatis without precedent among conventional consulting firms. In this connection,
we want to hire people who are not bound by the norms of the consulting
industry as this industry has conventionally existed to date.
As I mentioned earlier, there are an exceedingly large number of people
working in the consulting industry who do what they do for themselves as nonteam players. Among these people are many who, despite becoming quite
successful, are quite willing to accept that something is just fine as long as they
themselves are fine at the end of the day. While I believe that this is a trendthat is particular to the consulting industry, I don’t want to see my own
company become such an organization.
Since the prevailing theme is love & money, I’d like to create anorganization that, first of all, makes money and that also exudes love in a waythat will have former employees thankful for having worked for this company.
I’m looking for the kinds of people that can help me properly realize this theme.
To this end, what is important is the ability to respect others. Since this is
Dialog 2 147

an industry populated with self-centered people, this will take a lot of time.
Nevertheless, this is what I would like to change.
In addition, since I would also like to set up a new organization, I welcome
anyone capable of joining me in reaching my goal of love & money. On theother hand, I’d rather not have anyone who has successfully made his or her
way through an existing consulting firm. This is how much I am committed tocertain ideas for creating my own organization.
Matsumoto / In terms that relate to our businesses, I believe that people whoare highly interested in marketing are ideal, such that those who aspire tocultivate their own businesses are, not surprisingly, perfect for what we areconsidering.
Since those who will be joining will constitute founding members, they will
be given a chance to create everything themselves. Services to be provided toclients are one aspect of a business we seek to develop from scratch.
Moreover, as we aim to go public, stock options and other economic
benefits can also be enjoyed. I hope to attract people who can help pursue thesefuture plans together with me.
Fujii / Indeed, the field in which we are attempting to take on a challenge is theoutdated insurance industry. There remain many tasks for us to perform. If we
can successfully carry out these tasks one by one, we will be blessed byamazing business opportunities down the road. Ours is truly exciting work, is it
not?
Matsumoto / I agree completely. Let’s work together.

148

[About the authors]
Hideki Fujii
Upon graduating from the Faculty of Engineering at the University of Tokyo,
Fujii joined the Nomura Research Institute in 1996. Subsequent to serving
stints with Gemini Consulting Japan (currently PwC’s Strategy&) in 2000 and
AIG, Prudential Life Insurance, and MetLife Alico Life Insurance in 2002,
Fujii took up the post of COO of the Japanese offices of Zurich Life Insurance
Company, Ltd. In 2013, he assumed the post of President & Chief Executive
Officer of Pactera Consulting Japan after working for EY Advisory whileworking on almost every conceivable type of project affecting the insurance
industry and aiming to understand and resolve issues affecting the industry.
Tadao MatsumotoUpon graduating from Soka University in 2008, Matsumoto gained experience
carrying out IT consulting duties at a Japanese consulting firm before
becoming engaged in projects for the formulation of marketing strategies forfood manufacturers, telecommunications carriers, and life insurance companies.
He subsequently spent time working for two foreign-affiliated accounting
consulting firms and was then involved in the formulation of management
strategies and business and marketing strategies and projects for thedigitalization of operations primarily for the insurance industry. In 2016,
Matsumoto took up the post of CEO of Digital Arts Consulting Inc.
[Special thanks go to the following]
Sho Maruyama: Doctor in Physics (AI business)
Kimitaka Nakazawa: Data Scientist (AI business)
Tomofumi Yamaki: Sales (insurance)
Hitoshi Ozaki: Business Development (promotion of insurance business)

Dialog 2 149

All rights reserved. No part of this publication may be
reproduced without the prior permission of the publisher.
Public Interest Incorporated Foundation
Oriental Life Insurance Cultural Development Center
The Prudential Tower 20F, 2-13-10 Nagata-cho,
Chiyoda-ku, Tokyo 100-0014, Japan
Telephone: 81-3-5501-6570 Fax: 81-3-5501-6448
E-mail: info@olis.or.jp
Website: www.olis.or.jp

This book is originally published by Toyo Keizai Inc. in March 2017. With the consent of the authors
and the publisher, OLICD Center translated the book into English in December 2018.