Business of Foreign Life Insurance in Japan--- Series 4: Changes in Competitions ---As we mentioned in the previous article, in the early 1970s, the licensed
foreign companies were expected to sell different products or use different
distribution channels from the domestic companies. Not surprisingly, there
were some distinct differences between foreign insurers and domestic insurers
with respect to products and distribution channels during the period
1970s-1980s.
Firstly, the major products in foreign companies were nonparticipating typesof insurance policies whereas domestic companies mainly sold participatingtype of policies. In fact, domestic companies were not allowed to sell
nonparticipating types of products until the late 1990s, when the Amended
Insurance Business Act was put in effect1. Secondly, products sold by foreigncompanies put more emphasis on the protection function of insurance while
those sold by domestic companies focused more on the saving function ofinsurance.
More specifically, with regard to death protection, many foreign companies
provided products such as whole life insurance and term insurance. On thecontrary, domestic companies offered endowment type of insurance policies as
their leading products in which the savings function is emphasized more than interm life and whole life types of policies. There were also foreign companies
specializing in health insurance products. For instance, the cancer insurance
products provided by American Family Life are well known as successful
examples. It is worth to mention that most domestic companies were forbidden
to sell health insurance as single products until the end of 1990s2.
Thirdly, foreign companies were using various distribution channels whereas
sales agents were the dominant distribution channel of domestic companies atthe time. Many foreign companies preferred agency channels and some of themeven actively used non-life insurance agencies such as American Family andAmerican Life. On the other hand, the sales agent channel developed by foreigncompanies was very distinct from that of domestic companies. A large portion of
The dominant organizational form in Japan was mutual form at the time. There was only one
joint venture company called Heiwa Life.
2 Only few middle and small sized companies got approved of selling health insurance as single
product. Meanwhile other companies were allowed to sell health insurance riders.
11sales agents in domestic companies were part-time workers without higheducational background. On the contrary, most sales agents in foreigncompanies were full-time workers with high educational background. As atypical example, all sales agents in Sony Prudential Life were college graduatesand capable of using electronic devices for sales activities. They were called Life
Planners. Moreover, some foreign companies also tried to sell life insurance indepartment stores and retail stores. Seibu Allstate Life is known as the firstcompany among those.
The strategies of product and distribution
channel adopted by foreign insurers undoubtedly
provided a breath of fresh air to the domestic
market. Domestic companies gradually began toadjust their strategies with regard to products anddistribution channels from the mid-1970s onward.
Major companies got approved to sell term life
insurance as a single product by the end of 1974.
Successive releases of health insurance riders
designed for risks such as adult diseases andcancer came up during the last half of the 1970s
and the early 1980s. Instead of endowment
insurance, whole life insurance began to become amajor product in some companies since the late1970s and eventually became the industry’s

A Snapshot of TV Advertisement
for Variable Insurance released
by Nippon Life in 1987.
Catchphrase of theAdvertisement: Enjoy TheChanges.
(Source: 100 Years of History ofNISSAY, p.250.)

leading product in the mid-1980s. However, due to regulations, it was only fromthe early 2000s onward that the sales of nonparticipating types of insurance
policies and health insurance as a single product finally became an option fordomestic companies.
On the other hand, regarding the distribution channels, domestic companies
began to place more emphasis on quality improvement activities for eligible
sales agents with the cooperation of the Life Insurance Association of Japan
from the late 1980s onward. The educational background of sales agents started
to become important for some companies. Sales agents were required to not only
participate in training programs but to also pass the qualification exams
designed and designated by the abovementioned Association3. Some companies
For example, Financial Advisor Certification Examination started from 1988, the examinations
for Life Consultant and Senior Life Consultant started from 1992, and so on.
32also started to develop over-the-counter sales channels by setting up contact
points in department stores and supermarket stores during the late 1980s.
The Japanese economy entered a severe recession after the “bubble economy”
collapsed in the early 1990s. Nevertheless, no declining trend can be observedwith regard to the entries of foreign life insurers to the Japanese market. In the1990s about eight more companies entered and in the 2000s eleven morecompanies newly started business in Japan. In the early 2000s, especially,
foreign companies received great attention when they succeeded in buying fiveof the seven bankrupt domestic life insurance companies. As of March 2018,
sixteen of 41 life insurers are fully or partly owned by overseas capital. The factthat the Japanese government undertook the liberalization and deregulation of
the insurance market starting in the second half of the 1990s is largely
responsible for the entry of foreign capital despite the fact that some entries
ended in failure.
The ongoing liberalization and deregulation, however, also enabled domestic
companies to more easily and freely compete with foreign companies. For
example, the previously mentioned sales of nonparticipating policies and healthinsurance as a stand-alone product became available to domestic companies.
With respect to distribution channels, companies now sell insurance throughindependent agencies, brokers, or banks and other deposit-taking institutions.
In other words, the segmented insurance market created by the regulations
does no longer exist and all companies are at least nominally able to competewith each other on the same ground. As of March 2016, with respect to personal
insurance and based on the total amount of policies in force at the end of theyear three of the top 10 insurers are non-Japanese companies.

The End.
YingYing Jiang, Ph.D.

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