Market size and key playersThe Japanese life insurance market is one of the largest in the world. In terms of premiums written, Japan ranked third in the world, after the United States and China. Almost 90 percent of households are covered by life insurance, and life insurance penetration (gross insurance premiums as a share of the GDP) has ranged above five percent.
With a market share of almost 75 percent, life insurance plays an important role in the domestic insurance industry. As of 2021, there were around 42 private life insurance companies operating in Japan. Nippon Life Insurance Group, Dai-ichi Life Holdings, Meiji Yasuda Life Insurance Group, Sumitomo Life Insurance Group, and Japan Post Insurance represent key players in the market. In addition to these large corporations, there are other providers of life insurance products in Japan, such as cooperatives that offer mutual aid insurance to their members and small-amount and short-term insurance business operators, so-called mini insurers, which provide limited insurance products at low premiums.
Challenges posed by demographic shift and low interest ratesIn recent years insurers have been facing challenges, such as the low interest rate environment that has affected the profitability of traditional life insurance products and the demographic shift marked by low birthrates and a rising life expectancy that has curbed demand for life insurance. Annualized premiums from individual life insurance and annuity policies in force declined for the third year in a row in fiscal year 2021. At the same time, annualized premiums from third-sector insurance, such as medical, long-term care, and personal injury insurance, kept rising.
Amid the demographic shift that puts a strain on social security systems in Japan, consumer demand has shifted towards insurance products that cover risks associated with a long life. Over the past years, so-called third-sector insurance complementary to public insurance schemes has become an important segment for life insurers in Japan, and demand for health-related products, such as cancer and dementia insurance, has grown. Medical insurance represented the leading type of new policies taken out in fiscal 2021.