By Author: Matt Sheehan—- Analysts at GlobalData have warned that it could take until 2024 for growth rates in the Japanese life insurance market to return to their pre-COVID-19 levels.

The industry is expected to recover from 2021 onwards and increase at a compound annual growth rate (CAGR) of 1.8% over the next three years, but it will likely remain lower than 2019 figures GlobalData says.

The firm estimates that Japan’s life insurance industry will decline from JPY 31.4 trillion (USD 288.2 billion) in 2019 to JPY 28.3 trillion (USD $264.6 billion) in 2020, in terms of gross written premium (GWP).

“Despite the economy registering an annualized 11.7% growth in the last quarter of 2020, it contracted by 4.8% in 2020,” said Pratyusha Mekala, Insurance Analyst at GlobalData.

“Emergency measures introduced by the government and unfavorable economic environment impacted consumer spending, including life insurance.”

According to the data released by the Life Insurance Association of Japan, 6.74 million new business individual insurance policies were sold during April-September 2020, registering a year-on-year decline of 35.6%.

Stringent containment measures impacted sales through broker and agent channels that mandate face-to-face interactions. Sales representatives remain the dominant channel for life insurance policy sales in Japan with nearly 50% share.

In addition, persistent negative rate in domestic market and decline in interest rate in overseas markets have created an uncertain business environment for life insurers, which has led to reduced or temporarily suspended sales of foreign-currency denominated policies.

To mitigate the impact of the pandemic, life insurers have launched online platforms to generate sales, and are also expanding the coverage of their products by providing COVID-19 hospitalization and death benefits, in addition to the pre-existing benefits.

“The resurgence of the COVID-19 pandemic has dampened the growth prospects of the Japan life insurance industry,” Pratyusha concluded. “Momentum in vaccine rollout and government’s measures to support the revival of economy will aid the demand for life insurance in 2021.”