A forecast of Gen AI in the Japanese insurance industry

Generative artificial intelligence improves how insurance firms operate and enhance customer experiences by generating human-like content and accelerating knowledge-related tasks. According to the International Data Corporation, Gen AI global spending will reach a staggering $143 billion by 2027. 

Many industries, including insurance, healthcare, legal and financial services and the public sector, have prioritized and benefited from AI innovation. Now it's time to build out and better integrate this new technology. Before insurance firms fully implement Gen AI, however, companies must take a deep dive to better understand the technology, its current uses and potential future adaptations.

• Gen AI adoption in the Japanese insurance industry may still be in its early days, but many major insurance companies have already started utilizing Gen AI. In July 2023, the Japan-based MS&AD subsidiary Mitsui Sumitomo Insurance implemented the Gen AI chat tool, "MS – Assistant," to improve customer service and streamline accident response operations. 
  
• Meiji Yasuda Insurance Company also developed an AI assistant tool using Microsoft Azure Open Service AI. Additionally, they are increasingly collaborating with Japanese technology startups to further improve operation efficiency.
  
• Sumitomo Life Insurance Company recently added "Sumisei AI Chat Assistant," a ChatGPT-based system to create new business plans and improve productivity. 
  
• Dai-ichi Life Insurance Company, Limited partnered with ExaWizards to incorporate exaBase Studio into its own in-house AI utilization platform, utilizing Gen AI to improve overall operation efficiency. Dai-ichi Life is currently developing and conducting PoC on its application to generate operation reports and document templates, with plans for an EOY2024 internal rollout. 
  
• In 2023, Tokio Marine Holdings, Inc. adapted "One-AI for Tokio Marine," a ChatGPT-type system to increase operational efficiency." 
  
• In March 2024, Aioi Nissay Dowa Insurance Co., Ltd began providing Japan's first Gen AI insurance to compensate companies for expenses incurred from Gen AI, including intellectual property infringement and information leakage. In addition to post-accident compensation, Aioi Nissay Dowa aims to support safe and secure Gen AI use by providing building governance structure assistance from Archaic and additional consulting services to prevent future accidents and ensure early accident recovery.

Learning from banking

The Japanese insurance industry has mostly been integrating Gen AI to increase operational efficiency and for internal uses such as employees FAQ, collecting information and ideation. In contrast, banks, including Capital One and JPMorgan, increasingly use Gen AI for other operations such as risk modeling in fraud prevention and detection, credit scoring and sophisticated risk scenarios that leverage financial data to ensure more accurate and informative predictions.

According to an August 2023 Japan Data Scientist Society survey, a noticeable gap exists between the US and Japan regarding general business' adoption of Gen AI (in trial and in use): US 25.9% vs Japan 10.9%. NRI conducted surveys in May and October 2023 that illustrate different industries' Gen AI adoption across Japan, with the financial and insurance industry showing faster growth compared to other industries: 8.9% in May and 15.8% in October. 

According to a Financial IT Forum survey conducted during the NRI's annual Tokyo event for financial firm executives, a staggering 98% of non-life insurance company attendees who attended the Gen AI session indicated their "great interest" in Gen AI. While most large insurance companies are clearly paying attention to Gen AI, not all have readily adopted the technology.

How insurance firms could approach Gen AI

As mentioned earlier, in Japan, most insurance companies' Gen AI use has been limited to internal, short-term, individual operations. If we envision a future where Gen AI thrives company-wide, let's consider a different approach: a top-down and mid-to-long term commitment to develop and grow Gen AI, similar to how we've cultivated human resources. In addition, bias should be considered when incorporating GenAI for external clients. When launching Gen AI as an employee support or replacement, companies should consider the ways such as implementing various Gen AI models to mitigate the negative effect of bias.

Concerning privacy and ethics. Privacy concerns also play a leading role. Even when used internally, regulations caution against inputting private and confidential information. In July 2023, the Financial Data Utilizing Association (FDUA) launched the Gen AI working group. Tokio Marine HD and Nippon Life serve as members of the executive branch with an exploratory committee that includes the leading insurance companies Mitsui Sumitomo Insurance and Meiji Yasuda Life Insurance Company. The FDUA strives to establish Gen AI guidelines that promote safe and accurate Gen AI. NRI will similarly begin providing a private LLM service that responds to clients' requests regarding handling confidential and sensitive information.

The future is Gen AI

Even though Gen AI adoption in the Japanese insurance industry may still be in its infancy, most major insurance companies have already incorporated Gen AI to improve operational efficiency. Companies will soon likely adopt Gen AI for more external and specific/sophisticated operations. 

Yes, humans will continue to collaborate with humans. But in the near future, bold Gen AI technology could certainly lead other notable industry innovations. From sales, underwriting to product development and predictive risk modeling, specialized Gen AI could co-work and support its human counterparts. We have the power to determine and lead these next exciting steps toward innovation and growth in the Japanese insurance industry.