Japan’s life insurance industry is expected to contract by 1% this year compared to the 2 per cent growth registered in 2019, according to data and analysts specialists GlobalData.
The company has revised Japan’s insurance forecast in the aftermath of the global Covid-19 outbreak. The Japanese life insurance market is forecast to grow by 0.9% during 2019-2023.
The Covid-19 crisis has forced the country’s economy into recession, with GDP falling by 3.4% in the first quarter of 2020 after a 6.4 drop in the last quarter of 2019.
“This is expected to adversely impact the growth in new business premiums and insurers could face lower investment returns with interest rates being decreased by the Central Bank,” says GlobalData insurance analyst Tapas Bhowmik.
Insurers face added pressure from Japan’s dependence on offline sales. Latest data from Japan Life Insurance Institute reveals about 3% of life insurance products are sold through online channels, whereas sales representatives and agents together account for more than 70%.
Restrictions on movement and reduced face-to-face interactions are expected to impact life insurance uptake in the short-term. While insurers are trying to bridge this gap, it is expected to take considerable time to achieve significant digital transformation, GlobalData says.
An ageing population, low birth rate and low interest rates are key factors constraining life insurers’ growth prospects in Japan. Mortality updates and premium rate cuts in 2019 are also putting profitability under pressure.
“As insurers brace for the looming slowdown, the next steps for recovery will involve a marked shift from the legacy offline-based business processes to technology-driven solutions,” Bhomik predicts.