The life insurance industry in Japan is forecasted to recover from 2021 onwards and increase at a compound annual growth rate (CAGR) of 1.8% during 2020-2024. However, it will still be lower than 2019 figures, according to GlobalData, a leading data and analytics company.
GlobalData has revised Japan’s life insurance forecast in the aftermath of COVID-19 outbreak. As per the latest data, Japan’s life insurance industry is estimated to decline from JPY31.4 trillion (US$288.2bn) in 2019 to JPY28.3 trillion (US$264.6bn) in 2020, in terms of gross written premium (GWP).
Pratyusha Mekala, Insurance Analyst at GlobalData, comments: “Despite the economy registering an annualized 11.7% growth in the last quarter of 2020, it contracted by 4.8% in 2020. Emergency measures introduced by the government and unfavorable economic environment impacted consumer spending, including life insurance.”
According to the data released by the Life Insurance Association of Japan, 6.74 million new business individual insurance policies were sold during April-September 2020, registering a year-on-year decline of 35.6%. Stringent containment measures impacted sales through broker and agent channels that mandate face-to-face interactions. Sales representatives remain the dominant channel for life insurance policy sales in Japan with nearly 50% share.
In addition, persistent negative rate in domestic market and decline in interest rate in overseas markets have created an uncertain business environment for life insurers. As a result, insurers have reduced or temporarily suspended sales of foreign-currency denominated policies.
To mitigate the impact of the pandemic, life insurers have launched online platforms to generate sales. Leading insurers such as Meiji Yasuda Life Insurance and Dai-ichi Life Holdings launched online sales of life insurance policies post the onset of the pandemic. Insurers are also expanding the coverage of their products by providing COVID-19 hospitalization and death benefits, in addition to the pre-existing benefits.
Increased awareness of health and life insurance amid the pandemic has led to a spike in the demand for COVID-19 specific insurance products in 2020. Taiyo Life Insurance revealed in April 2021 that the sales of its COVID-19 insurance product launched in September 2020 exceeded 100,000 policies, indicating significant demand.
Ms. Pratyusha concludes: “The resurgence of the COVID-19 pandemic has dampened the growth prospects of the Japan life insurance industry. Momentum in vaccine rollout and government’s measures to support the revival of economy will aid the demand for life insurance in 2021.”