The latest regional report from GlobalData FYI;
The Japanese life insurance industry is set to grow at a compound annual growth rate (CAGR) of 4.7% from JPY39.7 trillion ($275.8 billion) in 2024 to JPY50.0 trillion ($371.2 billion) in 2029, in terms of direct written premiums (DWP), according to GlobalData, a leading data and analytics company.
GlobalData’s Insurance Database reveals that the life insurance industry in Japan is expected to grow by 6.8% in 2024. The growth is expected to be driven by economic recovery and rising domestic interest rates, which has supported the growth of yen-denominated life insurance products.
Swetansha Chauhan, Insurance Analyst at GlobalData, comments: “Japan’s life insurance industry grew by 9.0% in 2023, driven by an increase in consumer interest towards yen-denominated single-premium insurance products as the Bank of Japan raised interest rates in March 2024, marking the first increase in the last 17 years. Although the Japanese economy declined by 2.9% during January-March 2024 as compared to the previous year, it is expected to rebound in the latter half of 2024, which will support the growth of life insurance.”
Foreign currency-denominated policies, particularly those in US dollar and euro, witnessed stable sales due to the depreciation of yen and rising overseas interest rates until last year. However, noticing the suspicious activities involved in the rapid buying and selling of these policies, the Financial Services Agency (FSA) took a strict stance towards financial institutions offering them.
In January 2024, the FSA reported that around 60% of foreign currency-denominated policies were canceled within four years of purchase without waiting for maturity as the policyholders locked in profits after the set target amount was reached. As a result, some banks have reduced their foreign currency-denominated insurance offerings, shifting their focus to yen-denominated single-premium products.
The country’s aging population and increasing life expectancy are also expected to drive the demand for life insurance and pension products. According to the National Institute of Population and Social Security Research, people aged 65 and above accounted for 29.1% of the population in 2023 and it is expected to reach 34.8% by 2040.
The shift from traditional distribution methods to digital platforms is also expected to drive significant growth in Japan’s life insurance industry.
Chauhan adds: “As digital sales channels are gaining traction, life insurers are collaborating with tech startups to develop an online sales ecosystem, which will reduce initial costs significantly as compared to traditional channels and improve insurance accessibility. This move may alter the business model of Japanese life insurance companies, which has traditionally relied heavily on agents and sales representatives.”
Insurers are also leveraging technology to gain insights on customer behavior and offer personalized insurance products to customers. By integrating generative AI and wearable technology, insurers are enhancing their offerings to track and incentivize consumer health and wellness more effectively. As a result, wellness-linked policies, which provide premium discounts or rewards for engaging in healthy activities, are gaining traction.
Chauhan concludes: “The life insurance market in Japan presents a positive outlook, driven by cost-effective digital distribution solutions and innovation in product offerings. However, interest rate fluctuations, declining birth rate, and global market volatility are expected to remain a focus area for the Japanese life insurers over the next five years.”
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