Foreign Insurers Take Lead with Cancer and Medical Products
2, 02. 2006
Japanese life insurance companies have that sinking feeling. Even as their markets evolve away from their core activities, foreign life insurance companies are posting rapid growth centered on sales of cancer and medical policies, the so-called "third sector."
Thanks to latent (paper) gains on securities holdings as a result of rising stock prices, Japan's life insurers are now over the worst of their woes for the moment. Except for Taiyo Life Insurance Co. and Daido Life Insurance Co., the total value of business (policies) in-force (individual clients) fell at the nine major Japanese life insurance companies in the first half of fiscal 2005 (April-September) compared with the end of March 2005. Annualized premium income, an indicator of earnings growth, also shrank at six of the companies, including industry leader by share, Nippon Life Insurance Co.
Revenue Problems Started Around 1998
The total of business in-force of major Japanese life insurance companies has progressively declined since around 1998, due mainly to people's increasing reluctance to buy policies after a number of leading names collapsed. This trend continued during the first half of fiscal 2005. Business in-force at Nippon Life Insurance decreased 2.5% compared with the end of March, and by 1.7% at Dai-ichi Mutual Life Co., the No. 2 in market share in Japan. Meiji Yasuda Life Insurance Co., the No. 3 company, also shed 3.7%.
Alico Posts Double-Digit Growth
Foreign insurance companies, strong in cancer insurance, are significantly increasing policy contracts.
Major Japanese life insurance companies have built their business around what is known as death coverage. This entitles beneficiaries to large insurance payouts at the demise of the policyholder, but premiums are high and must be paid over a long period. More than 90% of Japanese already hold this type of insurance, and the market is now more than saturated. The "graying" of society, with more people reaching very advanced ages, however, has driven a dramatic shift to "before death" policies such as annuity and health insurance, for which premiums are relatively low and policyholders can receive insurance payouts while still alive.