Motor insurance, which is a dominant business line in the Japanese general insurance market, is set to witness stagnation over the next four years due to the coronavirus (Covid-19) outbreak, says GlobalData, a leading data and analytics company
GlobalData’s report, ‘Japan General Insurance: Key Trends and Opportunities to 2023’, reveals that the motor insurance gross written premiums registered a compound annual growth rate (CAGR) of 0.7% between 2014 and 2019. However, its share is set to decline from 53.3% in 2019 to 52.4% in 2023.
One of the key reasons for this slump is the recent decline in insurance premium rates. In 2017, the General Insurance Rating Organization of Japan (GIROJ) suggested rate cuts for the compulsory motor third-party insurance. GIROJ asked for an 8% reduction in the compulsory motor insurance premiums, to reflect the decline in claims as rising adoption of automation and telematics reduced the rate of accidents.
The Financial Services Agency of Japan has scheduled further rate cuts by an average 16.4% from April 2020. Even for motor hull business, insurers are offering discounts resulting in lower premiums.
In addition to this, insurers are facing additional pressure due to sluggish business environment. New vehicle sales in Japan declined by 11.0% last year, falling from 387,525 in 2018 to 344,875 in 2019.
Manish Vatsa, Insurance Analyst at GlobalData, comments: “The recent Covid-19 outbreak is expected to further impact new vehicle sales. This will further impact automobile insurance and we could see a decline in premium this year.
“To mitigate slowdown, insurers are offering add-on benefits and strengthening their cross-selling platforms. They must also look to tap new opportunities like car-sharing or renting enterprises to expand customer base and drive growth. Despite pressure on premium, motor insurance will continue to remain the leading business line within general insurance market in Japan.”
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