Quotes from the Innovation Roundtable

They said it couldn’t be done, but we held the latest installment in Celent’s series of innovation roundtables in Tokyo recently. Our innovation roundtables put the focus squarely on interactive discussion among the participants. This is a relatively untried model in Japan, where events typically take the form of conventional conferences with presentations. We’re glad we tried it though, because we got a very interesting line-up of firms. Participants included the whole spectrum: banks, capital markets firms, and insurers; Japanese and foreign firms; traditional mega-institutions and alternative new entrants. The discussion was lively; below are some quick notes I took of some of the more interesting comments made, to capture a bit of the flavor of the day. Why Innovate? “Innovation is not the goal, it is a method and a tactic.” “We need to innovate because it has become difficult to differentiate us from our competitors.” “In today’s environment, innovation is necessary if you want to stay profitable.” Paths to Innovation “Incremental innovation is an axymoron. You can’t innovate by increments; innovation requires a big bang change.” “It might be possible to rearrange existing elements to create something new.” “When to innovate? If our clients think a new service is interesting, we try and create it for them and see if it succeeds.” “Innovation needs to be business driven.” “Financial institutions need to have an innovation division; an incubation unit that accumulates ideas from throughout the company.” IT and Innovation “IT is not the impetus for innovation, but because IT inevitably evolves, that creates need for innovation.” “Legacy is a barrier: it is hard to throw things away.” Cultural Challenges “We need to justify ROI on any investment each fiscal year. It is hard to show this on an innovation project.” “If you think about it, financial institutions don’t even have R&D departments.” Quote of the Day “Changing company culture is really about changing oneself. I personally enjoy innovation and change. Innovative culture is about getting a bunch of people together who enjoy change.”

Insurance and Japan

One might naturally assume that the tragic events in northeastern Japan would also be devastating the Japanese insurance industry. By the beginning of April some 320,000 P&C claims related to the disasters had already been filed with insurers. After the Kobe earthquake of 1995, when many home and business owners discovered their policies did not cover the damage, people got in the habit of buying earthquake / tsunami insurance. So fortunately more properties were insured on 3/11 than may have been otherwise. In conversations with Japanese carriers, however, Celent has found that insurers are remarkably sanguine about the likely effect on the industry here. Firms say they have adequate reserves set aside precisely to cover an event of this magnitude, which has long been predicted. As a result, Celent expects that major Japanese insurers will continue to invest in strategic initiatives to boost competitiveness and lower costs in this very crowded market. IT spending growth at Japanese insurers, which has been close to flat for years anyway due to the maturity of the market, will suffer a modest dip in the short term. Smaller insurers are likely to put off renewal projects for a while. Pressure to merge will increase at some firms, but again the industry has seen a spate of consolidation activity in recent years already. The recent events are likely to encourage Japanese insurers to accelerate their international expansion efforts, which are already underway. Carriers have been looking abroad for growth opportunities, especially to the Asia Pacific region but further afield in the Americas and Europe as well. In Tokyo, along with the concern, there is a new competitive spirit in the air. April is the start of Japan’s fiscal year and businesses look determined to find ways to grow even as the economy is forecast to contract. The insurance industry would be no exception. For example, the past year has seen the emergence of new internet and mobile based distribution models and products, approaches which seem almost tailor-made for the post-3/11 era. Technology suppliers will want to know that amplified interest in business continuity is leading insurers to think seriously about cloud computing. The blooming sakura and early spring sunshine might be distracting me from some of the harsher realities of 21st century Japan. But certainly a little optimism is not misplaced in what is after all one of the world’s major insurance markets.

Two Fruits: “Miracle Apples” and “Business Renovation Project”

This week, Celent is pleased to feature an article from guest contributor, Hiroshi Yokotsuka, Managing Director, Member of the Board and CIO of the Tokio Marine & Nichido Fire Insurance Co., Ltd.


Hiroshi Yokotsuka

Hiroshi Yokotsuka

Today, I’d like to share with you a story that happened in Japan called “Miracle Apples” and Tokio Marine & Nichido Fire’s project called “Business Renovation Project.” Adam and Eve, the discovery of gravity, William Tell, and the iPod. have brought various challenges, discoveries, emotions, and pleasures to human beings. Another miracle was created by apple trees and an old man at the north end of Japan. Today’s apples are different from the one Newton saw. With generations of breeding improvement and sophisticated anti-pest methods, apple trees can bear big, sweet fruits. High-end apples in Japan are twice as big as the ones you see in the hotel lobby. But apples became very vulnerable. They can’t live a year without a substantial amount of agrichemicals, fertilizers, and careful weeding. There was a strong belief that it was impossible to grow apple trees without agrichemicals and other artificial materials until Mr. Kimura challenged it. Mr, Kimura, age 60, began his attempt of pesticide-free apple production 20 years ago. Kimura-san knew it wouldn’t be easy. But the hardship was far beyond his imagination. Eliminating thousands of worms by hand and disinfecting with vinegar or Wasabi water did not work, and apple leaves were devoured by insects. Kimura-san tried everything he could think of, but despite six years of effort, apple trees were weakened and dying even without flowering, and needless to say bearing not a single apple. Out of ideas and exhausted physically, mentally, and economically, he finally decided to conclude his unsuccessful life by killing himself. He walked deep into the mountains to find his final place. What he saw there were vital forests full of life. Trees spread their leaves and roots vividly, without any help from humans. Apples are made by apple trees, not by human beings. Kimura-san spent six years realizing that obvious truth. A human being cannot live alone; neither can an apple tree. Trees in a forest live with harmful insects and beneficial insects (and these are the human definitions of them), weed and fungus, worms, frogs, snakes, and animals in harmony. Completely forgetting what he had come to the place for, he rushed back and began to reconstruct his field to make apple trees comfortable. In that field, various plants sprouted and various insects, reptiles, and animals lived with the trees. The field became a very comfortable place for both apple trees and humans. The apples grown there are incredibly flavorful and nutritious. It became very hard to get the apples. A restaurant that serves apple soup using those apples is booked for a year in advance. Tokio Marine & Nichido Fire sells insurance 100% through its agencies. But it was just recently that TMNF realized the obvious fact that it is agencies who face customers and sell insurance products. Before that, agencies were compelled to sell the complicated insurance products designed for company’s sake, following the cumbersome processes designed by the company, not agency-friendly computer systems. The “Business Renovation Project,” started in 2004, focuses on how to make agencies feel comfortable through the business process. We cut insurance products and special clauses by half, refined and simplified the business process thoroughly, and rebuilt the computer systems, from the agencies’ point of view, from scratch. Now, a harmony of renewed insurance products, business processes, computer systems, support from TMNF’s employees, and above all agencies’ autonomous efforts create a very comfortable business environment. That, no doubt, results in comfortable experiences for their customers. In this way, TMNF’s “Business Renovation Project” bears fruit as delicious as Kimura-san’s Apples. About the author, Hiroshi Yokotsuka: [Read more…]


To view the English version of this article, click here.
Hiroshi Yokotsuka

Hiroshi Yokotsuka

















To view the English version of this article, click here. 
Hiroshi Yokotsuka

Hiroshi Yokotsuka





















Talking with a Consultant in Japan

I had an opportunity to talk to an independent consultant who has worked for some time now with insurance companies in Japan. He specializes in new technologies involving calculation engines. His experiences give some insight into the reasons why these emerging technologies are being adopted relatively slowly, and may also give some insight as to the pace at which these technologies may generally be adopted throughout Asia.

The standard processes Most insurance companies’ administration and illustration systems rely on mathematical IT or actuarial resources to provide input for new products and product revisions, as well as IT staff to make appropriate system changes.

Generally these systems use a table-based approach to derive premiums and projected values. This approach requires significant disk storage, particularly for administrative systems that have to hold historical data dating back many decades.

The process of generating these tables is generally entrenched in the product development cycle, and in many cases involves a number of people using various skills and techniques to develop models in a wide range of tools such as Excel, Delphi, Foxpro, and other programming languages. The time to market depends on, among other factors, product complexity and number of systems. In some cases, the speed also depends on current staffing levels because some of this knowledge is lost in staff turnover and personal toolset preferences. In this process, there is a distinct division of responsibility: the mathematical resource for the tables and their accuracy, and IT for their deployment and ultimate usage.

New technologies In recent years a number of vendors have released technologies to support deployment of new products and product revisions to many systems without the need to generate large and complex tables. These technologies also allow for a single centralized repository of calculation and business rules using a single software source – thus capturing all the intellectual property in one place and reducing the complexity of having to support multiple skill sets. The skill set required for these technologies is potentially a combination of traditional skills and new skills.

Challenges The adoption of these technologies requires a mindset change, not only in actuarial departments (product development) but also within IT. The business benefits are not always apparent to the individuals using the tools, because their focus generally is on “build” activities.

The definition of product components is generally done in a GUI interface, which requires different skills than Excel or traditional actuarial programming languages. The result is far more visual, and testing and debugging are far more interactive. So there is a learning curve, but it is usually short.

On the mathematical side, the main problem in introduction of these technologies is related to business processes (and software) that have been entrenched for many years, as well as the reluctance to change, which is particularly common in organizations where responsibility for parts of the process is being shifted.

On the IT side, the main challenges revolve around the interfaces and the need to consider the impact and efficiency of replacing table look-ups with calls to a third party product, not only for simple calculations done in an “online” kind of scenario, but also for full policy projections and usage in a batch type of environment. The challenge here is to design interfaces that are more generic so as to reduce maintenance and enable cloning in the event of new requirements, not simply to use these technologies as a plug-in replacement for table look-ups, which could lead to inefficiencies and negate the value of the new technologies.

My thoughts There is no doubt that these new technologies will be adopted – however, implementation needs to go hand in hand with a number of business considerations. Consultants should be aware that standard implementation processes may need to be tailored in light of local business and cultural practices. In the same light, business value may have to be demonstrated in alternative ways.