Japan’s life insurance market set for major growth
Japan’s life insurance market set for major growth | Insurance Business Asia
Life & Health
Japan’s life insurance market set for major growth
Development fuelled by two key factors
Life & Health
By
Roxanne Libatique
Japan’s life insurance market is projected to reach JPY50 trillion ($371.2 billion) in direct written premiums (DWP) by 2029, driven by an average annual growth rate (CAGR) of 4.7% from 2024, according to GlobalData’s recent analysis.
The data firm estimates that the Japanese life insurance sector will see a 6.8% increase in 2024, fuelled by domestic economic recovery and rising interest rates, which have supported the appeal of yen-denominated insurance products.
Japanese life insurance growth
Swetansha Chauhan, insurance analyst at GlobalData, highlighted that the industry experienced 9% growth in 2023, as consumer interest in yen-denominated single-premium policies surged following the Bank of Japan’s interest rate hike in March 2024, the first in 17 years.
The sale of foreign currency-denominated policies, particularly in US dollars and euros, has been stable due to the yen’s depreciation and higher international interest rates in 2023. However, Japan’s Financial Services Agency (FSA) intervened following concerns about the rapid buying and selling of these policies.
In January 2024, the FSA reported that approximately 60% of such policies had been cancelled within four years as policyholders cashed out after reaching their target returns. In response, several banks have reduced their offerings of foreign currency-denominated products, shifting their focus toward yen-based insurance products.
Demographic trends’ impact on Japanese life insurance market
The country’s demographic trends, especially its aging population, are also expected to support the life insurance market.
Data from the National Institute of Population and Social Security Research indicates that the population segment aged 65 and older made up 29.1% of the total in 2023 and is expected to rise to 34.8% by 2040, increasing the demand for life and pension products.
Shift from traditional to digital platforms
The shift from traditional sales channels to digital platforms is likely to be a key growth driver for the industry.
Chauhan noted that insurers are collaborating with technology startups to develop online ecosystems that reduce the distribution costs associated with agents and sales representatives. This change could disrupt the traditional agent-driven business model long relied upon by Japanese insurers.
Insurers are also utilising digital tools, such as generative AI and wearable devices, to gain customer insights and personalise their offerings. The integration of technology is helping insurers introduce wellness-linked policies, where customers can receive premium discounts or rewards for maintaining healthy lifestyles.
Chauhan added that while the Japanese life insurance market is positioned for growth, it faces challenges including interest rate fluctuations, declining birth rates, and global economic instability.
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