Product Transitions in Japanese Life Insurance Market— Series 5: Bubble and Deflationary Economy Period —In 1980s, savings and investment functions of life insurance had become moreemphasized as we mentioned in the previous report. Single-premium endowment
insurance product with a relatively high assumed interest rate, individual annuity
product and newly introduced variable insurance product were those designed torespond to such market needs. Giving the brisk capital market conditions,preferential taxation policies also played an important role in expanding the marketof the above insurance products.
For instance, new taxation policy released in April 1984 not only permitted
individuals to claim tax deductions for paid-up annuity premiums, but also appliedanoccasional

incometaxationpolicytomaturity

proceeds

offive-year

single-premium endowment insurance products which boosted the popularity ofcertain products although it fades away soon after the policy was terminated in
1988.

On the other hand, several important legal
reforms regarding the public health services werecarried out in 1980s which have stimulated thedevelopment of medical care insurance market tosome extent. Concretely, for example, according to
the Law of Health and Medical Service System for
the Aged promulgated in 1982 and enforced inFebruary 1983, the elderly individuals are requireda partial self-pay burden of their medical expenses
forthefirsttime.

Moreover,in1984,

anamendment to the Health Insurance Law regarding
employee’s medical expense was enacted. Under
the amended law, a fixed-percentage method wasintroduced instead of the fixed-amount method.
These revisions which are considered to beattempts to cut back on the increasing publicmedical service costs, however, virtually increased

ASnapshotofTV
Advertisement for Variable
Insurance
released
byNippon Life in 1987.
Catchphraseof
theAdvertisement: Enjoy TheChanges.
(Source: 100 Years ofHistory of NISSAY, p.250.)

the system users’ burden and created a growing demand for medical care1

the calculation method for self-pay burden of

insurance. Meanwhile, life insurance companies also commenced developing
the nursing care insurance market considering the extension of life expectancy
and rapid growth of aged population.
As

theJapanese

economyentereda

long-running deflationary period associated withthe collapse of the stock market and real estatemarketinthebeginningof1990s,

theenvironment surrounding life insurance businessbegan to change significantly. The type of variableinsurance undoubtedly lost its popularity as afinancial product due to the sluggish stockmarket. The prolonging stock market slump also
forced life insurance companies to lower theassumed interest rates of their products. Under
such circumstance, in pursuit of death benefits,
A Poster for Individual Dental
Insurance Plan, the First
Release by Meiji Life in 1988.
(Source: 110 Years of Historyof Meiji Life, p. 208.)

the demand for the types of whole life insurancewith term riders or simple term life insurance wasfacilitated, whereas the type of endowment
insurance which combines compensation element

and savings element together became rather unreasonable.
Nevertheless, giving the fact that there is no significant improvement in
disposable personal income due to the lingering economic recession, a growing
trend in the needs for medical care has been observed, while the needs for death
benefits has entered an underlying downward trend after reached a peak in themid-1990s. Such changes became more obvious in and after the 2000s which
could be partially attributed to the drastic revision of Insurance Business Act in1995.
For example, most of medical coverage for hospital expenses due to illness or
injury provided by domestic life insurance companies, which was also called thethird sector, was only allowed in a form of special contract with the exception ofsome small and medium-sized companies before the legal reforms. From July
2001, such constraints are fully removed and the mutual entry of life andnon-life insurance companies into the so-called third sector is permitted by theamended Act.
into each other’s markets through subsidiaries also became legalized from 1996

2In the meantime, the mutual entry of life and non-life insurance companieswhich has intensified market competition and stimulated product development.
However, overall the Japanese life insurance market is undergoing many
dramatic changes. Some traditional life insurance products such as theendowment life insurance which had long been a very popular product in Japanare losing the popularity, whereas some new markets such as medical
insurance or cancer insurance are showing significant potential for growth.

The End.

3(YingYing Jiang, Ph.D. in Commerce of Hitotsubashi University)