Demographic Changes and Life Insurance Business in Japan--- Series 3: Challenges and Opportunities --As we mentioned in the previous report, public pension system plays animportant role in providing income security for the elderly citizens. On theother hand, national health insurance program introduced in 1961 provides
Japanese citizens a universal coverage in health care, and there is also aspecial scheme for the elderly health care which is known as Act on Social
Welfare for the Elderly started in 1963. It is needless to say that these social
health systems have been playing an important role in protecting public health.
Especially the amendment regarding thelatter Act conducted in 1973 enabled theelderly a free medical service.
Nevertheless, rapid aging of Japan’s
populationfromthe1980s

poses

significant challenges for the above social
welfare systems. Since then various
reforms aiming at cutting back on the increasing public pension and medical
service costs have been undertaken. There are two most drastic reforms
regarding the public health care. The first one is that the elderly individuals arerequired a partial self-pay burden of their medical expenses after the law of
Health and Medical Service System for the Aged promulgated in 1982 andenforced in 1983. The second one is that according to the amended healthinsurance law, a new calculation method for self-pay burden of employee’s
medical expense, namely changing from a fixed-amount to a fixed-percentage
method, is introduced.
It is notable to mention that since 2008 there is a further increase in theelderly self-pay burden based on a new scheme for the population aged 75 orMoreover, reforms with respect to the public pension system such as cutting

1

above which is also known as the Late-stage Medial Care System for the Elderly.

back on future benefits, raising premiums and/or pensionable age have been
undertaken. On the other hand, a new public health care scheme which
specializes in long-term care of elderly, Long-term Care Insurance system isintroduced in April 2000.
In addition to the problems of rapid aging and declining fertility rate,
however, the lingering slump of Japanese economic keeps aggravating thedifficulties of securing enough financial resources to make the aforementioned
social security programs sustainable. In fact, from the middle 1980s,
government started to urge insurance industry to play a more active role incoping with issues resulted from the coming rapidly aging society. For instance,
in 1985, the Social Security Advisory Council, an affiliated organization ofJapan’s Prime Minister Office, suggests that the private sector may get more
involved in provision of service for the elderly. Meanwhile, the Insurance
Advisory Council, an advisory body to theMinisterofFinancerequests

thelifeinsurance companies to put more efforts ondeveloping products related to medical careand long-term care.
In response to these requests, varioustypes of medical care product and long-termcare product occurred in the late 1980s. Mostof these products were not designed as asingle product but in a form of special contract namely as a rider since most of
domestic life insurance companies were forbidden to sell those so-called thethird-sector insurance products until 2001 when an Amended Insurance
Business Act came into force. In contrast with long-term care products, themarket of medical care related products, either the single product type or therider type, have continued to grow significantly since then.

benefits has been observed from the late 1980s. Namely the market share of2

On the other hand, the shift of consumer needs from living benefits to deathwhole life insurance products and term life insurance products have been
showing an upward trend while that of endowment life insurance products hasentered an underlying downward trend despite the fact that these trends
reached a peak in the mid-1990s. Overall, nowadays the most popular
products in Japan are whole life types of insurance and medical care related
types which reflect that consumers concern are most concentrated on how tosecure her family’s financial future and take care of her medical expenses byherself.
It is noteworthy to mention that the market of personal annuity products
has been growing slowly since 1990s, despite the fact that the reforms of public
pension scheme such as cutback on future benefits and/or raise inpensionable age. The market growth of long-term care related insurance
products is slow as well and there are no significant changes after the nationalLong-term Care Insurance scheme started in 2000.
However, according to the Nationwide Actualities Survey on Life Insurance
2015 published by the Japan Institute of Life Insurance (JILI), only 13.2% ofsurvey respondents are satisfied with the existing social security programs on
meeting their health and safety needs while 85% of them are not and think it isnecessary to undertake some self-protections such as purchasing a life
insurance policy and/or a personal annuity product. Meanwhile, 42.3% ofsurvey respondents say that they cannot afford such self-protections and21.6% of them say such self-protections are not available for them due tohealth concerns and/or age restrictions. These survey results imply that there
is still room for developing life insurance business in Japan.

The End.

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