Speaker Name & Country :

Topic:

Yuu Shouji , Yukio Goto , Tetsushi Uosaki

The Institute of Actuaries of Japan

Insurance Companies in Japan, Facing the Challenges

of Aging and Population Decline

Agenda
1. Current Situation of Japanese Insurance Market
Facing the Low Birthrate, Aging and Population Decline
2. Actions of Japanese Insurance Companies to Survive
2.1 Actions of Japanese Life Insurance Companies
2.2 Actions of Japanese Non-life Insurance Companies
3. Summary
Disclaimer
The views expressed in this presentation are those of the presenter
This Presentation is of a general nature and is not intended to address the circumstances of any particular individual or entity

1. Current Situation of Japanese Insurance Market

Facing the Low Birthrate, Aging and Population Decline

Introduction Japan, the Front-Runner of Aging ASIA

Japan is the most Aged Country in the world

You might be able to predict Future World from our presentation!

Elderly Rate (65 - yrs population / total population)

40%

30%

Japan
China
India
Singapore
Thailand

Projected

20%

10%

0%
1950 55

60

65

70

75

80

85

90

95 2000 05

(Source: United Nations, World Population Prospects: The 2015 Revision)

10

15

20

25

30

35

40

45

50

55

60

Introduction Insurance Market

Life Insurance

Non-life Insurance

Premium volume (*)

Top 5 in Asia
(USD millions)

World
Rank

Insurance
Penetration

Japan

343,816

8.3%

China

210,763

South Korea

98,218

Taiwan
India

Country

Premium

Premium volume (*)

Top 5 in Asia

(*) as of 2015
(source: Swiss Re, sigma)

(USD millions)

World
Rank

Insurance
Penetration

China

175,737

1.6%

2.0%

Japan

105,891

2.6%

7.3%

South Korea

55,402

4.1%

79,627

15.7%

Taiwan

16,352

15

3.2%

56,675

10

2.7%

India

15,101

18

0.7%

Country

Premium

(*) as of 2015
(source: Swiss Re, sigma)

Demographic Situation of Japan

Diversification of the life Style
e.g. Late Marriage,
Single Living,
Not to have a Child

Low Birth Rate & Aging

Population Decline is continuing..

The Situation becomes worse and worse!
Uneasiness for Future

2 Population Decline
6

Demographic Situation Population Decline

140
120

Since 2010s, Japans population has begun to decline.

Projected
65- yrs
15-64 yrs

Population (Million)

0-14 yrs

26%

100

7%
37%

80
60

69%

61%

40

51%

20
24%
0
1950 55

60

65

13%
70

75

80

85

90

95 2000 05

(source: United Nations, World Population Prospects: The 2015 Revision)

10

13%
15

20

25

30

35

40

45

50

55
7

60

Uneasiness for Future Reduction in Social Security

Aging presses national social security budget.

<Reduction in Social security>

60%

Social security expenses (to General expenditure)

Elderly rate

Enforced

50%

Medical care
Raise of co-payment ratio of medical expense

40%

Pension
Reduction of payment , raise of eligibility age
Under Consideration

30%
20%

Medical care
Raise of co-payment upper limit

10%

Long-term care
Reduction in the scope of payment

1997

2000

03

06

09

(source: the Department of the Treasury financial statistics

(General expenditure and the social security expenses))

12

Situation of Life Insurance

Stable Mortality Margin has been an important source of earnings
Decrease the need for expensive death benefit.

Policies in Force for Individual Insurance

1,600
1,400

trillion yen

1,200

Sum insured

1,000
800
600
400
200
0
1995

2000

2005

(source: The Life Insurance Association of Japan, Life Insurance Fact Book)

2010

2014
9

2. Actions of Japanese Insurance

Companies to Survive

10

2.1 Actions of Japanese Life

Insurance Companies

11

Outline: Action of Insurance Companies

Life Insurance
Life

planning after retirement

Needs

of medical and nursing care

Expanding

overseas business

Non-life Insurance
Leaving

a job for nursing care

Increase
Change

of elderly living alone

of automobile insurance market

Expanding

overseas business

12

Life Planning after Retirement

Private annuity is in demand for covering life planning needs on the back of reduction in social security.

Annualized premium
from new business of annuity
950

Longevity risk

900
billion yen

850

Interest rate risk

800
750
700
650

Agency risk
2013

2014

2015

Source: http://www.seiho.or.jp/data/statistics/trend/pdf/8.pdf

13

Needs of Medical and Nursing Care

Bad health condition prevents the elderly from being issued the policy.
Simplified Issue (SI) products are developed in response to this situation.

Reason for non-participation

Health condition or age limitation
Economic situation
60%

40%

Mispricing risk
Underwriting risk

20%

Moral risk
0%
50-54

55-59

60-64

65-69

70-

Source: Report by Japan Institute of Life Insurance

14

Needs of Medical and Nursing Care

Private Long Term Care (LTC) market is expected to be expanding more and more.
Japanese life insurers have been developing LTC products.

Satisfaction about LTC coverage

sufficient
somewhat
sufficient
totally
insufficient

dont know

Regulation risk
Underwriting risk

33.6%

somewhat
insuficient

Moral risk

40.3%
Source: Report by Japan Institute of Life Insurance

15

Expanding Overseas Business

Overseas business is expanding on the back of expectation of the domestic population decline.

Premiums trend of overseas business

(Dai-ichi-Lifes case)
1000
900
800
700
600
500
400
300
200
100
0

billion yen

Strategic risk
FX risk
Operational risk
2012

2013

2014

2015

2016

(Source:IR report of Dai-ichi-Life)

16

2.2 Actions of Japanese Non-life

Insurance Companies

17

Outline: Action of Insurance Companies

Life Insurance
Life

planning after retirement

Needs

of medical and nursing care

Expanding

overseas business

Non-life Insurance
Leaving

a job for nursing care

Increase
Change

of elderly living alone

of automobile insurance market

Expanding

overseas business

18

Leaving a job for nursing care

Many 40's or 50's employees face nursing care of their family and some of them leave their jobs.
Services and insurance products are provided with regard to this issue.

Number of employees providing nursing care

for their family

Services and Coverage

Consulting service

8,00,000

(e.g. Construction and review of the personnel system)

6,00,000

Lump-sum benefit when facing nursing care

4,00,000

Seminar about working and nursing care

compatibility

2,00,000

Introduction of nursing care service providers

Strategic risk
(Source : Document from Ministry of internal affairs and communications)

19

Increase of elderly living alone

Elderly who live alone are increasing under the hyper-aged society.
Services and insurance products to support both elderly and landlords have been launched.

Ratio of elderly living alone to the whole

elderly (%)
1980 1990 2000 2010
female 11.2 14.7 17.9 20.3
male 4.3 5.2 8.0 11.1
Number of elderly living alone who died at
their house in Tokyos 23 wards
2002

2005

2010

1,364

1,860

2,913

2015
(latest)
2,891

(Source :website of cabinet office,

Bureau of SocialWelfare and Public health, Tokyo Metropolitan Government)

Coverage for loss of landlord

Loss of landlords house rent income
Renovation costs due to elderlys death
Services for elderly
Furniture moving service
Light bulb exchange service

Strategic risk
Underwriting risk

20

Change of automobile insurance market

Market shrinking and stiffer competition are expected in the largest business line of non-life insurance.
Much stronger customer contacts and more competitive products are needed to survive.
New type of automobile insurance and services have been launched under the circumstances.

Automobile market circumstances

Population decline
Young people are less interested in car
Urban concentration
Number of automobiles (thousand) and
ownership rate of automobile insurance
85,000
80,000 71.2%

78,661

73.8%
80,670

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

75,000 78,992
70,000

73.4%

80.0%
70.0%

Telematics insurance and services

Pay As You Drive type product
Safe drive support service
Automatic crash notification service
Daily automobile insurance
Product for those who dont own a car
Application from smart phone

Strategic risk

60.0%

Emerging risk

21

Expanding Overseas Business

Non-life insurance companies also have been expanding overseas business in order to pursue new
revenue opportunities and to diversify their risks.

Premiums Trend of overseas non-life insurance

business (Major 3 groups* total)
Net premiums (billion yen)

(*) Tokio Marine Holdings, MS & AD Holdings, Sompo Holdings

Strategic risk

1,800
1,200
600

FX risk
1,148

1,521

1,607

0
2013

2014

2015

Operational risk

(Source : IR materials of Tokio Marine Holdings, MS & AD Holdings, Sompo Holdings)

22

3. Summary

23

Summary
Changes can be new opportunities as well as challenges.
We would like to survive the dynamic change of social structure and become
a precedent that can be used as a guide.
We hope that everyone here will challenge without fear with respect to the
change, and obtain great opportunities.

24

Thank you for your attention !

22 November 2016

25

Appendix

26

Japanese Insurance Sales Channels

Life Insurance

Non-life Insurance
Tied Agents

16%

Direct Channel

Agents

8%
0.5%

Brokers

Bank

Direct distribution

Independent Agents

14%
59%

5%

Others

6%
92%

(source: Summary of Activities for Fiscal 2015 (Japan Institute of Life Insurance))

(source: Direct Premiums by Type of Distribution Channels (Fiscal 2015) (The

General Insurance Association of Japan))
28

Japanese Insurance Products

Life Insurance

Non-life Insurance
Automobile

Whole Life
16%

14%
25%

()

Endowment
12%

Fire

Term

Personal Accident

8%

Medical
11%

13%

() Including Health Insurance

Cancer
Annuity

7%

Others
16%

60%

Others

18%

(source: Life Insurance Fact Book (The Life Insurance Association of Japan))

(source: Statistics by Line (The General Insurance Association of Japan))

29

Demographic Situation Low Birth Rate

4

children per woman

Total Fertility Rate

1

Replacement Level

0
1950

55

60

65

70

75

80

85

(source: National Institute of Population and Security Research ,Collection of population statistics)

90

95

2000

05

10
30

Demographic Situation Long Life

Today, Japan has the longest life expectancy in the world.

Mortality Rate (age-adjusted)

Top 5 Countries By Highest Life

Expectancy (2010-2015)

20
Male
Female

Rank

Country

per 1,000

15

10

0
1950

60

70

80

90

2000

10

Life Expectancy
at Birth

Japan

83.3

Italy

82.8

Switzerland

82.7

Singapore

82.6

Iceland

82.3

(source: United Nations,

World Population Prospects: The 2015 Revision)

(source: Ministry of Health, Labour and Welfare , Vital Statistics)

31

Situation of Non-life Insurance

Net premiums remain flat Mainly due to the stagnation of automobile insurance and fire insurance.

Trend of voluntary insurance in Japan

Net premiums (billion yen)

8,000

Increase from 2010 to 2015 is due to

the special factors (price increase etc).

7,000
1,987

6,000

1,708

1,600

1,106

1,054

1,081

1,007

3,555

3,650

3,508

3,456

2000

2005
Automobile
Fire

2010

5,000

1,741

1,699
1,337

4,000
3,000
2,000

3,999

1,000
0
1995
(source : GiAJ)

Others

2015
32

Proportion of Profits of Overseas Insurance

Life Insurance

Non-life Insurance
23.9%
(\42.6 bln)

27.0%
(\160.6 bln)

32

Expanding Overseas Business : Life Insurance

It is the key to sustainable growth to expand the market by overseas expansion.
In recent years, noticeable cases of life insurance companies acquiring giant life insurance business in
the billion dollar range.

<Case of overseas expansion>

Company

Acquisitions

Region

Amount paid
for acquisition

Sep-2016

Nippon Life

MLC limited

AU

2.4 billion AUD

Dec-2014

Dai-ichi Life

Protective Life

US

5.7 billion USD

Mar-2016

Meiji Yasuda Life

StanCorp Financial Group US

5.0 billion USD

Feb-2016

Sumitomo Life

Symetra

3.7 billion USD

US

(Source:IR report of each life insurance company)

33

Expanding Overseas Business : Non-life Insurance

Examples of large acquisition cases (since 2013, as of Sep-2016)
Company

Cases

Region

Amount paid

May-2014

Sompo Japan

Canopius

UK

0.6 billion GBP

Mar-2015

Aioi Nissay Dowa

ITB

UK

0.1 billion GBP

Oct-2015

Tokio Marine & Nichido Fire

HCC

US

approx. 7.5 billion USD

Feb-2016

Mitsui Sumitomo

Amlin

UK

approx. 3.4 billion GBP

Examples of overseas advances excepting insurance business (since 2013 , as of Sep-2016)

Group

Cases

Region

Apr-2013

MS & AD

Establishment of risk management company

Thailand

Jul-2014

Sompo

Entry into automobile maintenance business

China

Sep-2016

MS & AD

Joint development of traffic accident reduction service based on

telematics technology

Thailand

(Source : IR materials and news release of Tokio Marine Holdings, MS & AD Holdings, Sompo Holdings)

34