Japan life insurance industry to top $350bn by 2028, GlobalData forecasts

Written by Dan McGrath

14/11/2023

The Japanese life insurance industry is forecast to grow at a compound annual growth rate (CAGR) of 2.0% from JPY37.1trn ($289bn) in 2024 to JPY40.2trn ($359.5bn) in 2028, in terms of gross written premiums, according to GlobalData.

The data and analytics firm’s insurance database has revealed that the Japanese life insurance industry is expected to grow by 4.6% in 2023, following the revival of agency distribution channels and persistent demand for single premium foreign currency-denominated insurance products.

GlobalData also said that regulatory intervention in improving agency standards and increasing competition for greater market share in short-term insurance will also support growth between 2024 and 2028.

Senior insurance analyst at GlobalData, Deblina Mitra, said: "In Japan, agencies are a prominent distribution channel for life insurance products. The channel witnessed a dip in revenue in 2020 and 2021 due to the COVID-19 outbreak that limited face-to-face interaction, leading to slower industry growth.

"The industry GWP recovered with double-digit growth in 2022, primarily after the regulator reclassified COVID-19 under the less severe category five infectious disease, leading to a revival in agency sales. The trend is expected to continue in 2023 and beyond, supporting industry growth."

GlobalData has also stated that the introduction of a new review system in early 2023 for agencies by the Life Insurance Association (LIAJ) will boost customer confidence and improve transparency, thereby positively influencing the channel’s growth over 2024-28.

LIAJ has set 200 standards relating to governance, personal data safety, customer support and post-sales service under the new system, with agencies that qualify for these standards being assigned a higher credibility rating by the LIAJ. As of March 2023, 42 agencies were qualified by the LIAJ.

Single-premium foreign-currency-denominated insurance products are also expected to support the industry’s growth in 2023, as ultra-low domestic interest rates since the late 1990s led to Japanese insurers offering policies in foreign currencies, including the US dollar, due to higher interest rates offered in those markets.

As a result of the Russia-Ukraine war, soaring inflation has pushed the US and other economies to raise interest rates, which, in turn, have provided an impetus for domestic demand for foreign currency-denominated insurance in 2022 and 2023.

Life insurance growth over 2024-28 is also expected to benefit from increased competition focusing on short-term protection-type policies. Increasing demand for these policies, traditionally sold by short-term insurers, led to incumbent life insurers entering the market during 2019-23.

Mitra added: "The Bank of Japan's (BoJ) anticipated tightening monetary decision in 2024, where it is projected to end negative interest rates, may cause volatility in global capital markets. Any repercussions from this decision on foreign government bond yields or interest rates can influence foreign-currency insurance demand over 2024.

"Japan's life insurance outlook over 2024-28 remains buoyant as insurers expand through agencies and launch innovative short-term insurance products. Insurers are expected to be cautious of the BoJ's interest-rate decisions and their potential impact on global capital markets over 2024."

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