This Japanese Startup Is Using Your Phone to Make Insurance Social

The insurance industry has proven very resistant to innovation. In fact, it has not really changed much in the past 200 years. The way insurance is sold and managed has changed, of course, but from the point of view of the consumer, things remain surpassingly like they were a century ago.

Today we talk with someone who is changing that. Kazuya “Kazy” Hata is CEO of JustInCase, a new breed of Japanese insurance company that offers insurance over the smartphone and then monitors how you use your phone, your lifestyle, and your social connections to determine what your premium should be.

We also talk about the next logical step for smart-phone-based insurance. Being able to ensure specific activities or possessions at will, maybe just for a few hours or while you are on a trip.

It’s a great conversation, and I think you will really enjoy it.

Show Notes

Who actually buys long-term cell phone insurance What behavior might make you a "risky" smartphone user Why there are so few life sciences startups in Japan The future of insurance on demand Why P2P insurance presents a unique market opportunity Why it is so hard for insurance companies to innovate How Japan's FSA is working to encourage insurance innovation

Links from the Founder

Everything you wanted to know about JustInCase Kazy's blog (Japanese) Follow Kazy on Twitter @KazyHata Friend him on Facebook Genome Link Online Hackathon

[shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I'm Tim Romero and thanks for joining me.

You know, the insurance industry is really resistant to innovation. The modern insurance industry was largely developed in the 17th and 18th century and it's not changed a whole lot since then. Oh, the tools have changed: insurance is sold very differently today, risks are better understood and better quantified, better measured, and the emergence of the global reinsurance market has made the system far more stable, but the way insurance works from your point of view, from the way you and I see it, things have changed very little over the past hundred years.

Most of the change in the industry is driven by regulatory changes rather than entrepreneurial innovation, and for insurance, I've got to say, I'm pretty much okay with that. Insurance firms need to remain solvent for decades and theoretically forever, and the fail fast, fail forward philosophy doesn't really work when it comes time to pay out life insurance or after a natural disaster, and yet, there needs to be a way to innovate and that's what we're going to talk about today.

Kazuya Hata or “Kazy” as his friends call him is the founder and CEO of JustInCase. JustInCase offers insurance over the smartphone and the first product they're insuring is your smartphone itself. JustInCase then uses artificial intelligence to analyze your usage profile and your social connections to determine the premium you should be paying.

We also talk about the next logical step for a smartphone-based insurance, being able to enter specific activities or possessions at will, maybe just for a few hours or while you're on a trip. The cellphone interface and the personal rich data which we continuously share about ourselves online, whether we know it or not allows companies to build up a personalized risk profile and both offer customized and flexible products and replace the number of fraudulent claims.

But you know, Kazi tells this story much better than I can so let's get right to the interview.

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[Interview]

I'm sitting here with Kazy Hata of JustInCase who offers not only insurance on your cellphone but actually sells insurance on the cellphone. Does that make sense?

Kazuya: That's actually right, yes.

Tim: Well, thanks for sitting down with me. Okay, let's talk about your product. You're offering basic cellphone repair insurance for 200 Yen a month, right?

Kazuya: Well, at the very cheapest, yes, and that's after the discount but we have about 30% on every discount, it can be as low as 200 Yen to maybe 400 Yen.

Tim: So that seems like it's cheaper than AppleCare but more expensive than manufacturer's warranties.

Kazuya: Right, right, right, because manufacturer warranty for the first 12 months normally comes without any cost.

Tim: Okay, and are you ensuring customers only at the point where they buy the products or are you insuring them, if someone's had their phone for three years and wants to get insurance, will you sell them insurance?

Kazuya: Yeah, we are open to both cases, brand new, of course, and also, we will definitely accept the second hand older smartphone, but our policy currently is only up to iPhone 5S, so iPhone 4 or iPhone 3, that's too old so we will not accept.

Tim: Oh, I see, so anything 5S or later.

Kazuya: Yes, 5S or later.

Tim: How many years ago was the 5S?

Kazuya: It's like three years or four, or maybe five years.

Tim: Oh, okay.

Kazuya: Yeah, so it's effectively everything.

Tim: So tell me about your customers. Are you selling to companies that are managing lots of phones, are you selling to individuals?

Kazuya: Right, our first product definitely - well, we want women definitely, but first product will be definitely by a man like late 20, 30, 40, maybe 50, like somebody who goes to the MVNO, not like SoftBank, DoCoMo which costs like $10,000 Yen per month but it can be lower, like 1/3.

Tim: And that's just because it's less expensive?

Kazuya: Yeah, it's less expensive and it can cover the second hand older smartphone, not only brand new one, because typically like AppleCare only accept something so brand new or like 50 days old.

Tim: Okay. Well, listen, before we dive into the real details of the business model, let's talk about you for a minute.

Kazuya: Sure.

Tim: So you founded JustInCase with your co-founders in 2016 but before that, you were an actuary at Milliman, right?

Kazuya: Right, right, right, that's where I started my career, yes.

Tim: Yeah, and your technical co-founder also worked with you at insurance companies as well, right?

Kazuya: He was actually my client at that time.

Tim: Oh, really? Okay.

Kazuya: But we know each other like 10 years.

Tim: But it seems to me like - I used to work in insurance and I know a lot of actuaries and actuaries tend to be very conservative people. They tend to be risk-averse in general. What made you decide to start a company?

Kazuya: Right, that's a good question. I wanted to be a mathematician when I was 18 years old. I felt I'm the most genius person in the world, then I went to the university and everybody wants to be a mathematician. Everyone is a lot more smarter than me, yes, okay, so I need to do something different. Otherwise, why am I here? So since then, about 20 years ago, my strategy of my life is do something different if you think I can do it, so I have insurance knowledge, insurance experience, oh, okay, insurtech. Maybe that's what I'm doing for the next few years.

Tim: Okay, but again, what made you decide to start a company? How did you mathematically look at, you know, these are the risks, these are the rewards, now it's time to start?

Kazuya: Well, it is a lot easier, like 10 years ago when lifemed was created, now it's more common to have a startup and funded by VCS or angels. Right now, it's a lot easier. Even me two years ago when I was thinking or Google it, and then everybody's doing outside of Japan but not in Japan. Why not? I'd like to do something nobody is doing.

Tim: Okay. Let's talk about your app which is really kind of the center of the product. So the app actually uses AI technology to track the user's interaction with the phone and determine their risk level and their insurance premium?

Kazuya: Yeah, yeah, that's right.

Tim: What exactly does it monitor?

Kazuya: Well, it monitors based on whatever you allow us to get and such information includes gyro accelerator, sensors information or steps you walked today, distance you walked or you moved, and then we analyze the data, not one by one but as a group, a policyholder group, and then we categorize them as risky or less risky.

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Tim: And do you use GPS location information?

Kazuya: We do use that when it's necessary, yes.

Tim: And what about things like social connections?

Kazuya: Right, yeah, we are in the middle of a filing process to the Japanese FSA which is a regulator but we don't plan to use that initially because it's more complex.

Tim: I would imagine that your social network would be very strong indicators towards your credit worthiness, your stability with the phone, right?

Kazuya: Right, right, right. Yeah, yeah. If you are using it everyday, and then if you're not, but obviously you’re not, the insurance business law is quite strict that insurance premium has to be fair among users. That's where we think we are very strong at.

Tim: You mentioned you haven't rolled that out yet. Do you think there will be resistance to that kind of idea, people being judged based on who their friends are or who their connections are? Do you think that Japanese people will accept that as a good thing or do you think that they will resist it as kind of a privacy invasion?

Kazuya: Yes, it's potentially quite controversial but probably, we don't use the information, only the information but we use multiple information, so in this smartphone insurance case, we don't use that information but people might think this dynamic pricing concept, they might not like it, but we're trying very hard to make it better for most of the people.