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Business Trends

Life insurance to cost less as Japanese live longer

Insurers to pass on savings from fewer death-benefit payouts

TOKYO -- Japanese life insurance providers likely will reduce premiums by 5-10% beginning next year, as the data they use to calculate insurance charges is expected to be revised to reflect longer life expectancy.

The Institute of Actuaries of Japan will soon submit proposed changes to its Standard Mortality Table to the Financial Services Agency for the first time in 11 years. This will start the ball rolling for changes to premiums at industry leaders Nippon Life, Dai-ichi Life Holdings' Dai-Dai-ichi, Meiji Yasuda  and Sumitomo Life as early as April 2018. Second-tier players like T&D Holdings units Daido Life and Taiyo Life, Fukoku Mutual and Asahi Mutual are expected to follow suit.

In an early draft of the institute's changes, the standard death rate for a 40-year-old male was revised downward by around 20% from 1.48 per 1,000 men in 2007 to 1.18. The rate for a 40-year-old female decreased from 0.98 to 0.88.

The overall improvement across all age groups came to 24.4% for men and 15% for women. Advancements in medical technology and a drop in suicides amid an economic recovery are major factors behind those improvements. Consequently, average life expectancy has increased between 1.62 and 2.53 years. Since these gains are more pronounced among people in their 30s and 40s, they are expected to see bigger premium cuts than older policyholders.

Lower premiums would only be offered to new customers or existing customers renewing policies. Insurers will continue to collect the same premiums for existing policies. Actual reductions will depend on the insurer. 

A 30-year-old man buying 10-year term policy with a 30 million yen ($270,000) lump-sum death benefit that currently costs 7,500 yen a month could expect to pay around 6,800 yen under a revised premium table. For a 30-year-old woman, the monthly cost of a similar policy would likely fall from 6,300 yen to 6,000 yen.

The average premium reduction for whole life insurance policies across all age groups is expected to come to slightly less than 5%. Premiums for group life insurance policies, which are taken out by companies and various organizations, may also fall.

Meanwhile, health insurance premiums are going up, since people living longer means more medical insurance claims. Whole life medical insurance policyholders likely will face an average 5% or so premium increase.


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