Japan life insurance to exceed US$350 billion by 2028

Competition expected to intensify in the short-term insurance segment

Japan life insurance to exceed US$350 billion by 2028

Life & Health

By Kenneth Araullo

The Japanese life insurance industry is poised for growth, with a projected compound annual growth rate (CAGR) of 2.0% from JPY37.1 trillion (US$289 billion) in 2024 to JPY40.2 trillion (US$359.5 billion) by 2028 in terms of gross written premiums (GWP).

According to a new report from GlobalData, a 4.6% growth is expected in the Japanese life insurance sector in 2023, attributed to the resurgence of agency distribution channels and the ongoing popularity of single premium foreign currency-denominated insurance products.

Additionally, regulatory efforts to enhance agency standards and intensify competition in short-term insurance are also anticipated to contribute to growth between 2024 and 2028.

GlobalData senior insurance analyst Deblina Mitra noted the significance of agencies in Japan's life insurance market. These channels experienced a decline in revenue during 2020 and 2021 due to the COVID-19 pandemic, which restricted face-to-face interactions. However, a recovery was seen in 2022, largely due to the reclassification of COVID-19 under a less severe category, which revived agency sales.

What will drive growth for Japan’s life insurance sector?

A new review system introduced by the Life Insurance Association (LIAJ) in early 2023 aims to bolster customer confidence and enhance transparency, expected to further drive growth in the sector. The LIAJ has implemented 200 standards encompassing governance, data safety, customer support, and post-sales service. Agencies meeting these standards receive higher credibility ratings from the LIAJ, with 42 agencies qualified as of March 2023.

The sector is also likely to benefit from the continued interest in single-premium foreign-currency-denominated insurance products. The ultra-low domestic interest rates in Japan since the late 1990s have led insurers to offer policies in foreign currencies, which are more attractive due to higher interest rates in those markets. The increased inflation rates following the Russia-Ukraine war in 2022 have further stimulated demand for these products.

“However, the Bank of Japan's (BoJ) anticipated tightening monetary decision in 2024, where it is projected to end negative interest rates, may cause volatility in global capital markets. Any repercussions from this decision on foreign government bond yields or interest rates can influence foreign-currency insurance demand over 2024,” Mitra said.

Furthermore, the life insurance market over 2024–28 is likely to see growth fuelled by heightened competition in short-term protection-type policies. These policies have seen an increase in demand, especially among younger demographics, due to their simple structure and ease of purchase. Notable examples include fertility treatment insurance for women and newborn hospitalization insurance.

“Japan's life insurance outlook over 2024-28 remains buoyant as insurers expand through agencies and launch innovative short-term insurance products. Insurers are expected to be cautious of the BoJ's interest-rate decisions and their potential impact on global capital markets over 2024,” Mitra said.

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