As I mentioned in my last blog post, Japanese insurers face many challenges resulting from an aging population, a strict regulatory environment and risk-averse organizational cultures. In this post I’ll talk in more detail about six of the key trends shaping the industry.
Key trends shaping Japan’s insurance sector
- The aging population. Japan’s population shrank by a record 244,000 in 2013 and more than a quarter of its population is currently aged over 65, according to government statistics. This trend is impacting premium growth and income across the board for P&C and life insurers.
- The mobile explosion. Japanese consumers are eager adopters of mobile technology. Smartphone penetration is high and multiple studies have found that the Japanese are among the world’s biggest spenders on smartphone applications and games.
- Regulation. Japan’s Financial Services Agency is one of the world’s strictest and most feared insurance regulators. This ensures that Japan has one of the world’s most robust and stable insurance sectors, but it also curtails opportunities for growth and innovation.
- Consolidation. In the past decade, Japanese insurers have embarked on a series of mergers and acquisitions, resulting in a market dominated by a handful of huge players. They have excellent cost discipline, but they are struggling to find ways of growing domestic income in a mature market with high levels of insurance penetration.
- International expansion. Faced with diminishing opportunities for domestic growth, Japanese insurers are looking to international markets. Many have targeted high-growth emerging markets in South East Asia, such as Thailand and Vietnam, for expansion.
- Tokyo 2020. As Tokyo gears up to host the 2020 Olympics, Japan’s government is making innovation and investment key national priorities for the next years. Tokyo’s famous bullet trains are the legacy of the Olympics in 1964. The next Olympics could be a catalyst for digital innovations of similar significance.
But what can we learn from these trends? And is the Japanese insurance market really an indicator of what is to come for other countries with aging populations? In the next post, I’ll offer some recommendations for insurers around the world.
In the meantime, to learn more, download the report: Accenture Technology Vision for Insurance 2014