Product Transitions in Japanese Life Insurance Market--Series 2: Reconstruction and Restoration Period--

Life insurance companies tended to have more managerial discretion overthe design of products before World War II started. As the war progressed,
however, the regulations on insurance business such as asset investments andproduct development had been gradually strengthened. For instance, despite
the fact that the death and/or injury due to the war are generally included in theexemption clauses of insurance contracts, the regulatory authorities demandedafully

unconditional

payment

withoutincreasing premium rates since April 1943.
Meanwhile, the insurance companies had
been also strongly requested to commence
sales of Koa Hoken, a type of patriotic life
insurance product designed by the regulatory
authorities in June 1943. Most companies
started selling this product by September
1943 except very few companies such as
Dai-ichi Life1. A notable point regarding salesof Koa Hoken is that the private insurancecompanies are allowed to sell nonmedical life
insurance product for the first time. The
reasons for its nonmedical design were said tobe the simplification of clerical procedures andthe countermeasures for the shortage of labour,
especially of medical examiner.

The First Leaflet for National
Savings Movement Issued by
Life Insurance Association ofJapan in 1939.
Source: 110 Years of History ofMeiji Life, p.112.

The regulatory framework for insurance business established during
wartime such as standardization of product basically continued to exist up tothe mid-1990s. Inflation and a surge of commodity prices occurred in theaftermath of the World War II caused a severe recession. Either the cancellationor the lapse of life insurance policy had increased significantly. In the meantime,the vast amount of insurance payment and the loss of overseas assets due to thewar had plunged many life insurance companies into financial difficulties.
The reason Dai-ichi Life refused the request for sales of Koa Hoken was a concern inthe underwriting risks.
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Under such circumstances, the regulatory authorities released several polices toreconstruct the insurance industry.
Firstly, a premium raise to cope with increasing costs and expenses of life
insurance companies had been initiated by the authorities in April andNovember 1946, which were so-called Standard Premium and Provisional
Premium respectively. It means a uniform premium system had beenaccomplished as the latter official premium rates were adopted by all insurancecompanies in January 1947.
Secondly, the authorities urged the insurance companies to commence thesales of term life insurance product in spite of its poor performance during thepre-war period as we mentioned in the previous report. The background of thismovement was that endowment insurance products were still the main
products of most companies but its high premium rates hampered the purchase
motivation of consumers when Japan’s economy was in the midst of a deep
recession. As a result, many insurance companies started the term life
insurance business from 1946.
Thirdly, deregulations of nonmedicalmonthly instalment life insurance andnonmedical group term life insurance
were implemented in 1946 and 1947
respectively.

Theformer

typeofproducts had been monopolized by thegovernment-owned

PostalLife

Insurance Service until the partial
revision of the Postal Life Insurance Actin October 1946, while the latter type ofproducts had been considered as alegallymonopolizedbusiness

A Pamphlet for Monthly Instalment
Insurance Issued by Daido Life.
Source: Daido Life- 100 Years ofChallenge and Creation, p.45

for

Nippon Dantai Life Insurance Company 2 until the enforcement of Japanese
Antimonopoly Act in April 1947. Meiji Life was the first company moving into theabove deregulated insurance markets in 1948, and most companies joined thebusiness as well by the end of 19513.

Nippon Dantai Life Insurance Company was a domestic life insurance company,
established in September 1934. The company specialized in group life insurancebusiness until April 1947.
3 Dai-ichi Life introduced its first nonmedical product in September 1947.
22On

theotherhand,somesavings-typeinsurance products gained a lot of attention
during the high inflation period of 1946-49. There
were about five companies which even made thistype of products as one of their major products4.
However, it gradually lost popularity as the periodof inflation ended and the economy started
recovering in the mid-1950s after the “specialprocurement”

boom

sweptacrossJapan 5 .

Meanwhile, the Ministry of Health and Welfareissued a new Life Table in November 1954 whichshowed a decline in Japanese mortality rates.
A Poster of Life Insurance
Awareness Month Issued byLife Insurance Association ofJapan in 1951.
Source: 100 Years of Historyof NISSAY, p.171

Responding to the new Life Table, insurancecompanies conducted a reduction in premium
simultaneously in April 1956, and many newproducts had been springing up.

However, it was not possible for a company to pursue a real product strategy
that seeks differentiation vis-a-vis other companies since the premium and thedesign of product were highly standardized by the regulatory authorities at thetime, although the company was entitled to make a decision on its leading
products and product portfolio composition as well. Needless to say, such
regulatory regime worked favourably to the large companies due to economies ofscale. The widening disparity between the large and small-to-medium sizedcompanies gradually became a concern for various societies especially theregulatory authorities.

To be continued…
(YingYing Jiang, Ph.D. in Commerce of Hitotsubashi University)

45

All were small and medium sized companies.
A boom brought about by the Korean War (June 1950- July 1953).
3