Japan's life insurance industry is projected to surpass the $350 billion mark by the year 2028

16 Nov, 2023

Japan's life insurance industry is projected to surpass the $350 billion mark by the year 2028

The Japanese life insurance industry is poised for significant growth, with a forecasted 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, measured in terms of gross written premiums (GWP), as per a recent report from GlobalData.

Anticipating a 4.6% expansion in the Japanese life insurance sector in 2023, the upswing is attributed to the resurgence of agency distribution channels and the sustained popularity of single premium foreign currency-denominated insurance products. Regulatory initiatives aimed at improving agency standards and intensifying competition in short-term insurance are also expected to contribute to the sector's growth between 2024 and 2028.

GlobalData's senior insurance analyst, Deblina Mitra, highlighted the significance of agencies in Japan's life insurance market. Although these channels experienced a revenue decline in 2020 and 2021 due to the COVID-19 pandemic, a recovery was observed in 2022. This rebound was largely influenced by the reclassification of COVID-19 under a less severe category, reviving agency sales.

To further foster growth, the Life Insurance Association (LIAJ) introduced a new review system in early 2023. This system aims to enhance customer confidence and transparency, featuring 200 standards covering governance, data safety, customer support, and post-sales service. Agencies meeting these standards receive higher credibility ratings, with 42 agencies qualifying as of March 2023.

Japan's life insurance sector is expected to benefit from the sustained interest in single-premium foreign-currency-denominated insurance products. Insurers have been offering policies in foreign currencies due to Japan's ultra-low domestic interest rates since the late 1990s. The increased demand for these products is also fueled by higher interest rates in foreign markets, particularly following the Russia-Ukraine war in 2022.

However, potential volatility in global capital markets may arise in 2024 due to the Bank of Japan's (BoJ) anticipated decision to end negative interest rates. Mitra pointed out that this decision could impact foreign-currency insurance demand.

The sector's growth between 2024 and 2028 is expected to be fueled by heightened competition in short-term protection-type policies, particularly appealing to younger demographics due to their simple structure and ease of purchase. Examples include fertility treatment insurance for women and newborn hospitalization insurance.

While Japan's life insurance outlook remains positive, insurers are expected to approach cautiously, considering potential impacts of the BoJ's interest-rate decisions on global capital markets in 2024. Meanwhile, the Japanese government has unveiled a proposal to combat the nation's declining birth rate.