Going back to the basics of general insurance and establishing a stronger footing for the future
- An increasingly more robust, sound, and reliable general insurance industry that supports the day to day lives of people and the greater economy -
（June 29, 2012）
We are constantly reminded that such disasters - and more importantly how we respond to them - define us as an industry; it is clear the recent events have reaffirmed the value of general insurance and the critical roles it plays. It also raised awareness of the effectiveness and robustness of the Residential Earthquake Insurance system in Japan, a private and public sector risk sharing scheme. Helping our customers in times of emergency also allowed us to reaffirm our confidence in our ability (backed by proper systems) to promptly pay out proper insurance claims and thereby fulfill our social and economic role.
2. The situation surrounding the general insurance industry
Japan's economy is showing signs of recovery, seen for instance in the gradual increase in production activities that were adversely affected by the Great East Japan Earthquake etc. However, as a whole, the economic recovery has remained moderate due to the sharp appreciation of the yen and the ongoing Euro crisis. While we expect this gradual recovery to continue for the time being due to the creation of jobs and the increasing reconstruction-related demand, there is little room for optimism as long as global risks – such as the prolonged debt problems in Europe and the worsening situation surrounding Iran – continue to loom.
As for our industry, our written premium income for fiscal year 2011 showed growth mainly because of the economic recovery. However, our underwriting results failed to break-even and continued to deteriorate due to high loss ratios in our main automobile insurance product lines and the rise in natural disasters both in Japan and abroad. Given the uncertainties and difficulties we face, such as the increasing severity of natural disasters, the expanding dimension of risk brought about by the rapidly aging and declining population, and the decline in the number of motor vehicles, we have no illusions regarding the business environment we must adapt to - and the challenges we need to take on - going forward.
3. Our challenges and strategic direction
General insurance is an important part of a country's infrastructure that supports the day to day lives of people and the greater economy. It provides financial security (and thereby peace of mind) against unforeseen events including large-scale disasters and accidents in everyday life.
Regardless of the difficult conditions we may continue to face, It remains absolutely necessary to strengthen and sustain our role as part of the overall social infrastructure. To this end, general insurers must perpetually strive to become increasingly more robust, sound, and reliable.
General insurance is an economic activity that collects, pools, and pays out money (via premiums and claims) in a fair and equitable manner. It is ultimately a business that is based on trust between customers and insurers.
We need to go back to such basics. We should spare no effort to continue to raise public awareness of general insurance, further improve our systems that back the proper payment of claims, ensure we remain financially sound to pay out claims even in times of large-scale disasters, and improve the business environment to better meet the diversifying needs of our customers. All of this, and more, will allow us to enhance our industry’s sustainability going forward.
I am convinced that dealing with these issues head on is our most important mission. These efforts will contribute to our nation’s ongoing efforts on laying down the foundations for our future.
4. Specific measures
In line with my above commitment, I will advance the GIAJ’s efforts in carrying out its Sixth Mid-term Business Plan (which was initiated this fiscal year) and many other important initiatives. Specifically, we will deliver on the following top-priority issues:
(1) Measures to make general insurance more robust, sound and reliable
a. Enhancing public awareness of general insurance
Raising the level of our customers’ confidence in us relies on the betterment of their understanding of insurance products and services.
The GIAJ has accomplished much in this field. We publish a ‘General Insurance Buyers' Guide’ as well as industry-wide guidelines for our member companies aimed at making sales material and pamphlets easier to understand. We will continue to enhance our efforts on making general insurance more familiar and consumer-friendly.
Specifically, we will consult experts to examine how to further improve our sales material and solicitation practices. We will also look into better ways to harmonize application forms and procedures.
We will also introduce an accreditation system (jointly with the Independent Insurance Agents of Japan, Inc.) for agents/solicitors this July. The course, the ‘General Insurance College Course’, will allow agents and solicitors to further improve their level of expertise and skills.
We will also enhance the function of the General Insurance ADR Center (General Insurance Counseling and ADR Center) where we directly deal with customer inquiries.
b. Minimizing social losses (Prevention of fraudulent and false claims)
As we continue to fulfill our role of collecting premiums and paying out claims, we intend to go a step further and make extra efforts to minimize social losses by preventing accidents, disasters, and criminal activity.
In addition to our long standing efforts on automobile theft prevention, we will also focus on strengthening measures aimed at preventing wrong-doing, including fraudulent and false claims.
Specifically, each member company will carry out more stringent investigations of cases suspected of false claims and pool such information at the GIAJ where its industry-wide database on fraudulent and false claims will be revamped. The GIAJ will also establish a division specializing in dealing with and preventing fraud. The new division will conduct and publish case studies to promote consumer awareness of this issue. We will also work with the government and try to get them to revise relevant laws and strengthen penalties.
(2) Measures to make general insurance companies and businesses more robust, sound and reliable
a. Strengthening the soundness of general insurers
An insurer must remain financially strong and viable in order to fulfill its most fundamental function of paying out claims in the event of losses. We will make sure systems are in place to ensure this is achieved.
We will approach this by reviewing and enhancing our Business Continuity Plan (BCP) and also by petitioning the government to review and revamp the Earthquake Insurance Scheme as necessary, particularly from the perspective of protecting the well-being of our people and their lives. In regard to the tax reform for fiscal year 2013, we will appeal for the broadening of the pre-event catastrophe loss reserve system.
We will also actively take part in discussions in various international organizations regarding global supervisory standards and solvency frameworks, and make sure our interests are appropriately represented.
b. Diversifying our business to better meet customer needs
In Japan, we have seen an evolving change in customer needs and distribution channels in accordance with significant social and economic changes (e.g. the rapidly aging population). The Financial System Council is currently looking at and discussing insurance products and services, the scope of business for insurers, and insurance sales and solicitation. The GIAJ takes part in these Council discussions as an observer and will continue to actively present our views and submit proposals as necessary.
Our current proposals include the relaxing of the scope of business for insurers and their subsidiaries and allowing them to offer insurance associated services (e.g. trust services regarding insurance claims and auxiliary business relating to disaster prevention consulting), the easing of conditions for carrying out concerted activities in order to provide compensation for new types of risks promptly, and the allowance to establish a joint private sector-government compensation framework to deal with large risks which exceed the private sector’s capacity. These proposals are aimed at responding to customer needs more flexibly. Furthermore, we are also petitioning for legal frameworks to facilitate our member companies’ expansion overseas and the export of some of our infrastructure systems such as the industry-wide calculation of burning costs (for highly public lines of business).
We hope the Council will positively consider our requests and proposals from a broad perspective, taking into consideration the value and significance of general insurance in the context of people's day to day lives and the greater economy.
We recognize that the Great East Japan Earthquake has raised public awareness of disasters and accidents, and heightened the level of expectation for our industry.
The fundamental role of general insurance is to collect, pool and pay out money (in the form of premiums and claims) in a fair and equitable manner. This function relies on our customers’ confidence in our industry. This key fact has not changed over the years and will continue to remain so in the years to come.
As the Chairman of the GIAJ, I am determined to lead our efforts and initiatives to make general insurance in Japan increasingly more robust, sound, and reliable.
On environmental and social responsibility issues (including rebuilding efforts related to the Great East Japan Earthquake), I will continue to build on the work of my predecessor and steadily and surely deliver on our promises.
I am committed to carrying out my responsibilities and achieving my goals as the Chairman of the GIAJ. Your support and cooperation are greatly appreciated.