Japan will increase compulsory automobile liability insurance premiums by an average of 6.2% from Nov. 1, the first rise in 13 years following approval by a government advisory body.
According to Nippon’s report, the Compulsory Automobile Liability Insurance Council – which advises the Financial Services Agency – endorsed the premium hike after examining trends in medical expenses, labour costs, and systems investment linked to claims handling and policy administration. Under the revised tariff, the standard premium for two-year compulsory coverage on private-use passenger cars will climb by 910 yen to 18,560 yen, with Okinawa Prefecture and certain remote islands excluded from the change. For motorcycles with engine displacement of 250 cc or more, the two-year premium will rise by 880 yen to 9,640 yen.
Compulsory automobile liability insurance, or CALI, provides compensation for bodily injury and death resulting from traffic accidents and is a legal requirement for vehicle registration and use on public roads. In earlier years, CALI premiums had been reduced as the spread of advanced safety features in vehicles contributed to fewer accidents and lower claim frequencies. The latest adjustment brings mandatory auto liability pricing more into line with current claims and operating conditions. The higher CALI rates sit alongside broader motor portfolio pricing decisions that must account for medical inflation, the duration of bodily injury claims, and ongoing spending on digital claims and policy platforms.
The premium increase is occurring as Japan’s motor insurance market transitions from a period of decline to moderate growth. GlobalData projects that the sector will expand at a compound annual growth rate of 1.8% from JPY5.8 trillion (US$39.3 billion) in 2026 to JPY6.2 trillion (US$44.1 billion) by 2030 in terms of gross written premiums. According to GlobalData’s Global Insurance Database, the motor market, which recorded consecutive contractions between 2021 and 2023, posted growth of 1.6% in 2024 and is expected to expand by a further 1.4% in 2025.
Rate actions, regulatory developments, and telematics-linked offerings are among the factors steering the market back to positive territory, alongside insurer efforts to protect underwriting margins. “Within Japan’s broader general insurance landscape, motor is rebounding on higher premium rates, rising vehicle sales, and the introduction of a new risk-based rate classification in 2025. The growth of motor insurance will be further supported by consumer awareness driven by rising claims from natural disasters,” said Swarup Kumar Sahoo, senior insurance analyst at GlobalData.
Vehicle sales patterns are reinforcing premium growth prospects. The Japan Automobile Manufacturers Association reports that total automobile sales for January-September 2025 increased 5.0% compared with the same period in 2024. Mini passenger cars were up 11%, small trucks 10%, and large buses 22%, expanding the pool of insured vehicles. At the same time, weather-related events continue to be a significant driver of motor losses.
Floods, typhoons, and hailstorms have generated high claim numbers and highlighted exposure concentrations in certain regions. The August 2025 Kyushu-Yamaguchi flooding led to nearly 17,000 auto claims totalling about $87 million, while a hailstorm in Hyogo in 2024 produced auto claims of about $590 million. Insurers active in the motor line are responding with rate measures and tighter risk selection, while reviewing reinsurance programs for catastrophe-exposed books. Market observers expect further upward movement in motor pricing in 2025, with premium rates forecast to rise again in the fourth quarter by around 6% to 8.5% following increases earlier in the year.
Regulatory change is also reshaping how motor risks are categorized and rated. A risk-based rate classification and model-specific rating system that came into effect in January 2025 links premiums to the particular make and model of the insured vehicle, replacing broader, more uniform groupings. “The introduction of the risk-based rate classification and model-specific rate system, effective January 2025, will support motor insurance growth. Under this, insurance premiums are determined based on the specific make and model of the insured vehicle, rather than applying a uniform rate across broad vehicle categories. This granular classification allows insurers to more accurately price the risk profile associated with each vehicle model, considering factors such as accident frequency, repair costs, and claims history unique to that model,” Sahoo said.
Insurers are also updating products and pricing in response to electric mobility and growing vehicle connectivity. Companies are rolling out electric vehicle–focused covers and usage-based policies supported by telematics data and AI-driven claims assessment tools. Programs such as the Drive Agent Personal telematics plan, which uses connected dashboard cameras and incident video, are expected to influence driving behaviour and claims processing for both electric and internal combustion engine vehicles from January 2026.
Sahoo said: “Japan’s motor insurance industry is set for a steady, sustainable expansion, benefiting from rate adequacy, regulatory modernization, and product innovation. Telematics-led propositions, Insurtech partnerships, and cloud-enabled claims will raise efficiency and customer satisfaction, while improved catastrophe modelling enhances pricing precision. Insurers that invest in technology, product innovation, and robust risk management will get the competitive advantage in the years ahead.”
