Some market trends and predictions from GlobalData;
The Japanese general insurance industry is set to grow at a compound annual growth rate (CAGR) of 2.2% from JPY11.7 trillion ($81.1 billion) in 2024 to JPY12.7 trillion ($93.9 billion) in 2028, in terms of gross written premiums (GWP), forecasts GlobalData, a leading data and analytics company.
GlobalData’s Insurance Database reveals that the Japan general insurance industry is expected to grow by 1.7% in 2024, supported by an increase in the demand for policies covering natural catastrophic (Nat-cat) events and workmen’s compensation policies.
Sneha Verma, Insurance Analyst at GlobalData, comments: “Japan’s economy went into a recession in early 2024 after witnessing a contraction in the last two quarters of 2023. As a result, the general insurance industry witnessed a decline of 0.5% in 2023 as compared to 3.4% growth in 2022. The growth is expected to rebound in 2024, supported by an increase in premium rates across many general insurance lines driven by high inflation and rising claims due to extreme weather events.”
Motor insurance is the leading line of business in the Japanese general insurance industry and is estimated to account for a 47.5% share of the general insurance GWP in 2024. Despite recording higher vehicle sales as compared to the previous year, motor insurance declined by 0.1% in 2023. The decline was due to a reduction in motor insurance premiums, as many insurers reduced the premium rates in 2023 due to lower cases of traffic accidents. A similar trend is expected in 2024.
Verma adds: “However, a rise in the frequency and severity of extreme weather events over the last few years has led to an increase in claims. As a result, insurers are expected to assess their risk exposure, which can lead to an increase in motor insurance premium rates in 2025.”
As per the General Insurance Association of Japan (GIAJ), 79,468 claims have been paid for vehicles damaged due to the hailstorm in Hyogo Prefecture on April 16, resulting in an insured loss of JPY31.4 billion ($0.21 billion). Motor insurance is expected to grow at a CAGR of 1.5% during 2024-28.
Property insurance is the second-largest line that is expected to account for a 27.6% share of general insurance GWP in 2024. Property insurance is expected to grow by 5.4% in 2024, driven by an increase in premium prices due to frequent natural catastrophic (Nat-cat) events.
In June 2023, the General Insurance Rating Organization of Japan (GIROJ) announced that it would raise the nationwide average “reference net rate,” which serves as a guideline for personal fire insurance premiums, by 13%. This is the fourth increase in the last six years and the largest increase ever, reflecting the sharp increase in insurance payments due to a series of natural disasters, as well as rising repair costs. Property insurance is expected to grow at a CAGR of 2.8% during 2024-28.
Liability insurance is the third-largest line that is expected to account for 8.9% share of general insurance GWP in 2024. It is expected to grow by 4.2% in 2024, driven by an increase in the demand for cyber insurance and workers’ compensation policies. As per the Ministry of Health, Labor and Welfare, workers’ compensation claims increased by 21% in 2023 as compared to the previous year. Liability insurance is expected to grow at a CAGR of 3.9% during 2024-28.
Personal Accident and Health (PA&H), Marine, Aviation, and Transit (MAT), and financial lines insurance are expected to account for the remaining 15.9% share of the general insurance GWP in 2024.
Verma concludes: “Slower growth in motor insurance, which accounts for almost half of the general insurance premiums, presents a moderate growth outlook for Japan’s general insurance industry over the next five years. Persistently high claim payouts led by frequent Nat-cat events and high inflation will prompt insurers to reassess their risk exposure and increase premium rates in the short term.”