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Nov 2020

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Wisdom and tactics in life insurance

Source: Asia Insurance Review | Sep 2020

The year to date has not been kind to any nation in Asia Pacific – where a sizeable portion of the burden of COVID-19 has fallen on the life insurance sector. We spoke to Mr Akio Negishi, chairman of the Life Insurance Association of Japan and group CEO of Meiji Yasuda Life to find out how the life sector was meeting the challenges of 2020 and preparing to serve customers in future.
By Paul McNamara
 
 
This was meant to be Japan’s year – with Tokyo hosting the 2020 Olympic and Paralympic Games, offering a chance for the nation to demonstrate its excellence across a wide spectrum of areas including sports, tourism, technology and financial services. But the global coronavirus pandemic made sure that could not happen. 
 
Faced with the postponement of the games, Japan is doing its best to carry on as normal while reconciling measures to control the spread of the pandemic with socioeconomic activities.
Compounding this, Japan also faces a super-ageing society where people live to be over 100 and this will have structural implications that include the need for social security reforms.
 
Collective efforts of life insurers
In order to get a sense of how this sophisticated and complex nation has adapted to recent challenges, we spoke to Mr Akio Negishi in his capacity as both the chairman of the Life Insurance Association of Japan (LIAJ) and group CEO of Meiji Yasuda Life.
 
Mr Negishi is very clear on what he sees as the biggest tasks that the LIAJ will face in the next 12-24 months.
 
“As the battle against COVID-19 continues around the world, our urgent task is to see how the life insurance industry can fulfil our public mission while keeping in mind how we deal with future pandemic risks that may arise,” he said. 
 
“We believe it is important for the industry overall to enhance the effectiveness of each response by balancing the need for quality customer service and preventing further infection, as we continue to gather and share information on member company initiatives.” 
 
“Compared to the Great East Japan Earthquake in 2011, the number of applications for extending the moratorium on premium payment and policyholder loans under the COVID-19 pandemic significantly increased due to the large impact of the coronavirus on economic activity. The impact of a pandemic such as COVID-19 is a risk that is more persistent, and is different from a natural disaster that only affects certain areas. Thus, we need to respond effectively to this particular trend by answering customer needs more thoroughly,” Mr Negishi said.
 
A less personal future
But Mr Negishi acknowledges that there are also positive lessons for the life sector. “Customers’ interests have changed and include a requirement for more non-face-to-face interactions coupled with rising health consciousness because of the pandemic. These are favourable changes for the insurance industry.” 
 
“As demand for non-face-to-face interaction increases, measures such as seeking different ways of communicating with customers and improving their convenience, as well as providing services that support coverage and health promotion responding to rising awareness preparing for such risks are being considered. The LIAJ would like to help member companies by sharing best practices,” said Mr Negishi.
 
Closing the protection gap
Mature societies are becoming increasingly aware of the need to improve consumer understanding of the importance of insurance – particularly life insurance – and so the LIAJ is looking at various initiatives to help in promoting uptake.
 
“In the era of the 100-year life, we will focus on both responding to the requirements of the ageing society and improving the insurance literacy of high school students,” said Mr Negishi.
“As with responding to the ageing society, the focus is particularly on dementia in terms of policyholders in the long run. We are interested in identifying and assessing the kind of challenges related to customer care follow-ups and providing recommendations. To be more specific, there are three parties involved when you consider an insurance policy: The policyholder, the insured and the beneficiary. If one of these people is affected with dementia, we need to consider potential problems such as how we handle benefits payment and policy claims and how we would solve these problems,” he said.
 
Spreading the word
Improving insurance literacy in Japan is a different type of problem with a different type of solution. “The LIAJ has been promoting education for various age groups, ranging from children to the elderly, to enhance their awareness,” said Mr Negishi. “If we are to live for 100 years, each of us must have opportunities to understand the public and private insurance system better and the concept of self-help from an early stage of life. 
 
“We will support building an environment where high school students can acquire adequate knowledge of insurance in the classroom, given that insurance education at high school will start in 2022 under the new official curriculum guidelines, as well as the lowering of the legal age of adulthood to 18,” Mr Negishi said.
 
Bringing definition to the market
There are areas of regulation that the LIAJ may be able to help define and develop in the Japanese market in the immediate future – and this is another area where Mr Negishi has some valuable insights.
 
“The Advisory Council on the Economic Value-based Solvency Regime, which was established by the Financial Services Agency of Japan, published the final report that includes timeline for implementing the economic value-based solvency requirement in June 2020,” said 
Mr Negishi.
 
“The life insurance industry will continue its efforts to engage with the supervisors, based on the council’s report. It is important to be proactive and to see eye-to-eye on important issues such as insurance capital standards and IFRS17,” he said. “Expansion of overseas business is one of the strategic options in order to capture overseas market growth. For that purpose, enterprise risk management must be sophisticated with reference to international standards of insurance supervision.” A 
 
Mr Negishi is also group CEO of Meiji Yasuda Life (MYL) – and so we asked him a series of questions of direct relevance to leading life insurance companies in Japan.
 
What has been the overall net impact of COVID-19 on business – both renewals and new business?
The impact of the COVID-19 pandemic on our business was limited, although investment returns were affected due to the market decline. Our soundness saw no significant impact and risk resilience is still quite high. New business was negatively impacted due to voluntary restraint of face-to-face sales activities under the declaration of emergency.
 
Under these circumstances, moving forward this year, MYL will focus on responding to COVID-19 by putting off its three-year medium-term management plan for a year, but we are also looking beyond the coronavirus as we build up our capacity to deal with what lies ahead. Protecting customers who suffer from COVID-19 is a top priority. We are working on establishing an infrastructure that enables us to complete procedures on the internet and allows remote working by our employees.
 
How do you think the insurance landscape will change for MYL in the next 12 months based on the ‘new reality’ post-COVID-19?
It is important to respond to the changing balance between face-to-face and non-face-to-face interactions. For our company, before COVID-19, 70-80% of customer services was undertaken face-to-face, but non-face-to-face is increasing after COVID-19. Responding to this environmental change, we are working on the digitalisation of business like 100% e-transactions in new contracts, conservation and benefits payment, as well as diversifying communication methods. We believe that combining face-to-face and non-face-to-face customer service, depending on the needs of customers and situation while taking into account the advantage in communication, will lead to improved productivity.
 
How are you leveraging new technologies to make MYL ‘future proof’? 
As a service that encourages policyholders’ health promotion, information and advice based on analysis of health check-up results and big data, as well as mobile apps that leads to early detection and prevention of dementia are being provided. 
 
For improving customer services, we are leveraging AI for chatbots that responds to customer inquiries and mobile apps which train sales personnel on facial expressions and ways of talking. In terms of improving operational efficiency and solving new business challenges, the wide use of AI, especially in areas of benefits payment, claims assessment and customer support, as well as medical receipt reading by AI-OCR and optimisation of search engine of internal information resource, has become common. In addition, in the areas of expanding coverage of underwriting and increasing effectiveness of marketing, we are working on collecting big data into data lakes and analysing data by utilising AI and machine learning.
 
What are the new pressures that modern insurers are being forced to cope with – like regulation and a ‘lower-for-longer’ interest rate environment?
Sophisticated enterprise risk management is important to raising investment returns by expanding capacity of risk taking even in a low-interest-rate environment while accommodating standards and regulations such as insurance capital standards and IFRS17. In addition, as institutional investors, insurers are expected to manage both securing higher returns over the medium and long term while contributing to SDGs as well as ESG factors through an enhanced engagement with investees. 
 
Our overseas business in five countries, including Asia, also contributes to group profit. We continue making efforts for further growth that leads to a 15% of contribution to consolidated operations results.
 

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