Despite being the world's third largest non-life market in gross premium terms, Japan trails well behind other countries in terms of insurance penetration and density. In 2015, Axco ranks Japan only 40th in terms of non-life premiums as a percentage of GDP and 32nd in terms of premiums per capita.
The main reason for Japan's modest ranking is the low level of property and casualty rates, which reflect the country's excellent risk quality and aversion to litigation. The compulsory motor third party liability premium for a private car, for example, is only USD 260 for a 24-month policy term.
The greatest threat to the Japanese non-life market, from a long-term perspective, is the ageing and shrinking of the Japanese population: according to current projections, the proportion of people aged 60 years and over will rise from 33.1% in 2015 to 42.5% in 2050, while the total population will shrink from 126.60mn to 107.41mn.
Quite apart from the reduction in economic activity, older people tend to cash-in or non-renew their savings policies, to occupy smaller homes and to drive less powerful and less expensive cars. Although their health and private motor premiums are higher because of their age, older people generally spend much less on insurance than the family-forming middle-aged.
Japan’s population is set to plummet from 127 million to 88 million by 2065 - and is projected to drop even further to just 51 million by 2115 if current trends continue.