Competition is intensifying among insurance companies involved in group credit life insurance in Japan, says the Life Planning Department of The Toa Reinsurance Company (Toa Re).
Fiercer competition is backed by more aggressive initiatives among both banks that sell group credit life insurance and insurance companies that underwrite group credit insurance.
Insurers and banks
Toa Re’s Life Planning Department says in the report, “Japan’s Insurance Market 2024”, that banks are enhancing initiatives to differentiate the features of group credit life insurance, as their ability to compete by reducing mortgage interest rates has reached its limit.
Meanwhile, insurance companies, especially life insurers just entering the market, are enhancing initiatives to position group credit life insurance as a product that will generate stable earnings over the medium-to-long term.
Targeting group credit life insurance portfolio growth, insurance companies are increasing products and services based on bank and market needs to enhance their relationships with banks.
More flexible insurance products
Now, insurance companies are promoting more flexible insurance policies, raising upper limits on the amount of assurance that an applicant can apply for with a declaration (non-medical), and providing additional services to further strengthen their relationships with banks and to address banks’ need to differentiate themselves through group credit life insurance.
In offering more flexible insurance policies, including raising upper limits on application without medical examinations, insurance companies are underwriting customers with products that are better suited to their lifestyles, including products featuring broad coverage for customers not eligible for group credit life insurance through normal declaration procedures due to their health condition, as well as joint group credit life insurance policies for couples that exempt one partner from loan repayments if the other partner dies or becomes severely disabled.
Another reason that companies are raising upper limits on applications without medical examinations is to address the pronounced increase in housing prices.
Specific examples of additional services include a supplementary living benefit that guarantees a portion of the loan balance if the policyholder contracts cancer or another major illness, but does not incur additional interest or, from the policyholder’s perspective, additional premiums.
Extending repayment periods is another option that is attractive to young customers because longer repayment periods reduce premium instalment payments with guaranteed repayment periods of up to 50 years.
Additional services
Additional services that go beyond insurance policies themselves are also now being offered. Examples include the creation of specialised agencies staffed by mortgage loan experts who provide financial planning and consulting services, health consultation services over the phone available 24 hours a day, and services that provide second opinions through interviews with general practitioners.
In Japan, people taking on large loans for purchases such as housing are often required to take out group credit life insurance.
Group credit life insurance reduces the balance of a loan to zero if the policyholder dies or becomes severely disabled while repaying the loan. Banks often require group credit life insurance when structuring loans, so sales at bank counters are a primary channel for acquiring customers. Insurers have conventionally strengthened their relationships with banks in ways such as collaborating with banks within their corporate groups and attracting local banks by offering sales incentives.
Competition among insurers in this branch is expected to continue in the future.