Japan’s industry adjusts to low interest rates
The cancellation of the EAIC 2020 is truly unfortunate. The role of insurance is now in the spotlight around the world and its role in society is growing. We hope that we can overcome these difficulties early and the next time we meet, we would like to have a great discussion about the development of insurance business.
We would like to report on the overview of Japanese life/general insurance in last few years, especially FY 2018.
For life insurance, the situation is steady despite very low interest rates. This is the result of adapting to changes in the market. For example, we have continued to create new products over the past few years, such as health-promoting insurance and dementia insurance.
Responding to low interest rates is a common challenge for many Asian countries, therefore we believe that Japan’s experience will be useful not only in product development, but also in asset management, risk management and other areas.
In individual insurance in FY 2018, the number of new policies and the amount of benefits significantly increased due to strong sales in whole life, term life and cancer insurance. Considering this situation, premium income in FY 2018 increased compared to the previous year. The total premium income in FY 2018 was JPY33.91tn and it was the first increase in the last three years.
Ordinary profits were JPY3.01tn, which increased for two consecutive years. The basic profits which represent the profitability of life insurance companies, were JPY3.77tn which increased for three consecutive years.
Total insurance benefits paid in FY 2018 was JPY28.78tn.
Looking at insurance claims, annuities and health benefits, insurance claims decreased for 11 consecutive years since 2008 due to the decrease in number of existing postal life insurance policies. Annuities had been increasing continuously until FY 2014, however, it has been decreasing since FY 2015. Maturity benefits increased for the first time in three years.
Among all the insurance claims paid, the number of policies and the amount of death benefits were 1.14m and JPY3.08tn. As for the maturity benefits, 1.24m and JPY2.81tn respectively. Death/ maturity benefits increased for three consecutive years.
Among all the health benefits paid, the number and the amount for hospitalisation benefits were 7.24m, and JPY715.9bn, surgery benefits were 4.41m and JPY444.9bn in which both benefits rose in numbers and amounts. Hospitalisation and surgery benefits increased for 14 consecutive years.
Recently Japan has faced numerous large-scale natural disasters such as earthquakes, typhoons, and torrential rains and the general insurance claim payments regarding natural disasters has been increasing.
We recognise the increasingly important role the general insurance industry plays in supporting citizens to prepare for natural disasters that is increasing in severity in the recent years.
Net claims paid on all classes of insurance during FY 2018 amounted to JPY5,324.2bn, an increase of 13.2% compared with the previous fiscal year. This was due to an increase in earthquake insurance claim payments for earthquake with its epicentre in the northern part of Northern Osaka and 2018 Hokkaido Eastern Iburi earthquake, as well as increased fire insurance claim payments caused by domestic natural disasters such as Heavy Rain Event of July 2018, typhoon No. 21 (Jebi), and typhoon No. 24 (Trami), etc.
Net premiums written for FY 2018 came to JPY8,392.8bn, (up 0.1%, compared with the previous fiscal year) due to an increase in premium for fire insurance mainly consisting of earthquake insurance and new types of insurance.
Due to increased gross profit on asset management, ordinary profits for FY 2018 increased to JPY864.3bn (up 6.4%, compared to the previous fiscal year). Net profits for the current year decreased to JPY676.5bn (down 0.3%, compared with the previous fiscal year) due to decrease in special profits, etc.
All these figures are based on materials published by The Life Insurance Association of Japan and The General Insurance Association of Japan.