The Japanese life insurance industry is poised for growth, with a projected compound annual growth rate (CAGR) of 2.0% from JPY 37.1 trillion (USD 289 billion) in 2024 to JPY 40.2 trillion (USD 359.5 billion) in 2028 in terms of gross written premiums (GWP).
According to a new report, the Japanese life insurance sector is expected to grow by 4.6% in 2023, driven by the resurgence of the agency distribution channel and the continued popularity of single premium insurance products denominated in foreign currency.
In addition, regulatory efforts to improve agency standards and increase competition in short-term insurance are also expected to contribute to growth between 2024 and 2028.
Senior Insurance Analyst Deblina Mitra noted the importance of agencies in the Japanese life insurance market. These channels experienced a decline in sales in 2020 and 2021 due to the COVID-19 pandemic, which limited face-to-face interactions. However, a recovery was seen in 2022, largely due to the reclassification of COVID-19 to a less severe category, which revived agency sales.
What will drive growth in Japan’s life insurance sector?
A new examination system introduced by the Life Insurance Association of Japan (LIAJ) in early 2023 aims to boost customer confidence and increase transparency, which is expected to further drive growth in the sector. The LIAJ has introduced 200 standards covering governance, data security, customer support and after-sales service. Agencies that meet these standards will receive a higher credibility rating from the LIAJ, with 42 agencies qualified as of March 2023.
The sector should also benefit from continued interest in single premium foreign currency insurance products. Japan’s ultra-low domestic interest rates since the late 1990s have led insurers to offer policies denominated in foreign currencies, which are more attractive due to higher interest rates in these markets. Rising inflation rates following the Russian-Ukrainian war have further stimulated demand for these products.
“However, the Bank of Japan’s (BoJ) expected monetary tightening decision in 2024, when it is expected to end negative interest rates, may cause volatility in global capital markets. Any impact of this decision on foreign government bond yields or interest rates may affect the demand for foreign currency insurance over 2024,” said Mitra.
In addition, the life insurance market is likely to see growth over 2024-28 due to increased competition in short-term protection-type policies. These policies have seen increased demand, particularly among younger demographics, due to their simple structure and ease of purchase. Notable examples include fertility treatment insurance for women and hospitalisation insurance for newborns.
“Japan’s life insurance outlook for 2024-28 remains buoyant, as insurers expand through agencies and launch innovative short-term insurance products. Insurers are expected to be cautious about the BoJ’s interest rate decisions and their potential impact on global capital markets over 2024,” said Mitra.
Elsewhere in the country, the Japanese government has unveiled a proposal to introduce a new system to address the country’s declining birth rate.
