An Overview Of The Japanese Life Insurance Market

by Trefis Team
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Quick Take

  • Japan is the second biggest insurance market in the world after the U.S. and generates nearly 20% of global premiums.
  • Only 43 life insurance companies operate in the country of which nearly half are foreign owned. Foreign-owned companies have a combined share of 20%.
  • Insurance penetration (total premiums to GDP ratio) in the country is quite high close to 10% vs. 4% in the U.S.
  • 15% premium growth was observed in 2010 and 2011 but 2012 saw a decline.
  • We estimate that more than one-third of Japan’s population is covered by life insurance.

Continuing our series on the world’s biggest life insurance markets, we turn our attention east towards Japan. Japan is the second biggest life insurance market in the world after the U.S., accounting for 20% of the world’s premiums and more than half of the premiums originating in Asia. [1] The insurance sector, like most business sectors in the country, was affected by the Great East Japan Earthquake, which shook the nation in 2011. The disaster resulted in close to 16,000 deaths and 3,000 missing persons. The Life Insurance Association of Japan has reported more than 20,000 cases related to the earthquake, with total insurance benefits and payments of around 160 billion yen. [2]

There are only 43 life insurance companies in Japan, a very small number for a mature market. In comparison, the U.S. has more than 800 life insurers while France has more than 250. Japan Post Insurance (JPI) dominates the Japanese life insurance market with more than 20% market share. [3]

Nearly half of the insurers in the country are foreign-owned operating as subsidiaries. Domestic companies with foreign capital include Allianz Life, AXA Life, AEGON Sony Life, ING Life, Manulife (NYSE:MFC)  Life, MassMutual Life, MetLife (NYSE:MET) Alico and Prudential Financial (NYSE:PRU) Gibraltar Life. [4] Zurich Life, Cardif Assurance Vie and Aflac operate as branch offices of foreign companies. [4] Foreign-owned companies have a combined market share of close to 20% in the life insurance market in Japan.

See our full analysis of Prudential here

Historical Growth

Insurance penetration measured by taking premiums as a percentage of GDP, is quite high in Japan, close to 10%. [5] In comparison, the U.S. has a penetration of just 4%. Premium growth, measured in U.S. dollar equivalents was close to 15% in 2010 and 2011. But monthly statistics from The Life Insurance Association of Japan indicate a 3% year on year decline in premiums measured in yen in 2012. Claims and benefits are around 61% of premiums.

Although life insurers in Japan have earned profits in the last few years, the average gross profit margin is more than 20%. The weakening of the yen in the last few months has hurt foreign insurers as the yen has fallen around 20% against the dollar since November 2011. [6] Due to the uncertainty regarding the yen, we will not be considering further currency fluctuations for this article.

Penetration And Products

There are more than 210 million policies in force in the country. [7] The number of individual life insurance policies has been steadily increasing from 110 million in 2007 and 117 million in 2009 to 127 million in 2012. The total number of individual insurance contracts at the end of January, 2013 was around 133 million. [7]

Around 35% or 47 million of the total policies in force are whole life insurance policies. These policies offer coverage for the whole life of the insured and are generally the most popular insurance product across the world. We believe that this product can be used as a benchmark for actual insurance penetration in the country. The World Bank shows that the total population of Japan is close to around 128 million. This indicates that around 36% of Japan’s populace is covered by whole life insurance.

Medical life insurance is the second most popular insurance product in Japan, accounting for 20% of the policies in force. Cancer insurance accounts for 15% of the policies in force while endowment policies account for 10%. Term life insurance, which provides coverage for a limited period of time at a fixed payment rate, also accounts for 10% of the total policies in force in Japan.


With intense competition and the similar nature of products offered by various companies, distribution is the most important factor affecting sales. Most companies rely on the “bancassurance” or The Bank Insurance Model (BIM) using the retail banking network for distribution activity, with sales made via insurance agents.

Investment Income

Investment income is critical for life insurers. Close to 70% of the revenues earned by life insurers in Japan comes from investment income. Fixed maturity securities account for 80% of the invested assets in Japan with government bonds accounting for 55% of these. Close to 10% of the assets invested in securities are invested in corporate bonds with 6% in stocks and 5% in local government bonds.

Our Forecast

While Prime Minister Shinzo Abe has undertaken measures to provide monetary stimulus, and the full effects from a weakening yen have yet to be realized. The country’s GDP fell by 0.4% in the last quarter following a 3.8% decline in the previous quarter. [8] The Japanese government has provided a projection of 2.5% GDP growth for the fiscal year starting in April. [9] For our forecast, we take a more conservative projection for the Japanese economy with an expected annual average growth of 2%. Assuming insurance penetration around the historical average of 9%, we expect the Japanese life insurance market to grow to $533 billion by 2019.

The Final Take

Uncertainty regarding the yen makes any forecast regarding the Japanese market a matter of speculation rather than calculation. The forecast we have provided above does not take currency fluctuations regarding the yen.

We currently do not provide a separate forecast driver for the Japanese life insurance market, but you can modify the interactive charts below, to gauge the effect a change in the international markets will have on our price estimates for insurers like Prudential and MetLife.

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Japan Post Insurance (JPI)
  1. Swiss Re’s World Insurance []
  2. Payments under Life Insurance Contracts in the Great East Japan Earthquake, At the end of March 2013 []
  3. Life Insurance Business in Japan 2011-2012, The Life Insurance Association of Japan []
  4. Member Companies with Foreign Participation* (As of the end of March 2012) [] []
  5. Swiss Re’s World Insurance and figures for GDP growth are taken from the World Bank’s website. []
  6. Analysis: Weak yen trend to slow as wary Japan insurers take stock of “Abenomics”, Reuters, February 25, 2013 []
  7. Monthly Statistics, The Life Insurance Association of Japan [] []
  8. Japan GDP Decline Strengthens Abe’s Case for Stimulus: Economy, Feb 14, 2013, Bloomberg []
  9. Japan forecasts real GDP growth of 2.5 percent in year from April, Reuters, Jan 27, 2013 []
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