The GIAJ Chairman's Statement (Translation)
（March 19, 2015）
It has been around nine months since I was appointed Chairman of the GIAJ.
I would like to report on our activities and related events since.
1. Adoption of the Seventh Mid-Term Business Plan
At our board meeting today we adopted the Seventh Mid-Term Business Plan (from fiscal 2015 to 2017). We are determined to achieve sound development of the industry, raise the level of the public's confidence in us, and contribute to a more secure, safer society. In consideration of the environment surrounding us in the coming 5 and 10 years and its impact on the industry, we will concentrate our efforts on the following eight priority issues: 'the super-aging society', 'globalization', 'emerging risks', 'natural disasters', 'insurance crime', 'establishment of new systems for insurance solicitation', 'consumer consultations, complaints and dispute settlement', and 'consumer education'.
(1) Response to the super-aging society
In Japan, those aged 65 or more will account for about 30% of the population in 2020 and nearly 40% in 2050. Based on the expectation of the coming full-fledged transformation into the unprecedented, super-aging society, looking from a mid- to long-term standpoint, there are concerns about negative effects on potential growth rates and fiscal policies including social security. It is important to examine the general insurance industry's tasks to address the super-aging society, so that we can contribute to the country's efforts to be one of the world's front-runners in resolving emerging problems, carrying out its responsibility for the next generation.
Along with the transformation into the super-aging society, the number of elderly driver's license holders will increase. We recognize the need to take effective measures to prevent traffic accidents involving elderly people. In this regard, we will undertake an analysis and study of such accidents, which will be utilized for our awareness-raising activities. In addition, a task force established under the 'Customer's Voices and Experts Advisory Council', which consists of external experts, will examine challenges brought by the super-aging society as well as roles to be undertaken by the industry.
(2) Response to globalization
The globalization of finance and insurance is heightening the necessity of convergence of international supervisory and regulatory standards. International standard-setting activities have been accelerated in recent years including the global risk-based Insurance Capital Standard (ICS) being developed by the International Association of Insurance Supervisors (IAIS). We will continue expressing our opinions on these issues, paying particular attention to regulations that may significantly affect the Japanese general insurance industry.
As regards our infrastructure support to Asian regions and countries, we, together with the General Insurance Rating Organization of Japan and the General Insurance Institute of Japan, will actively provide technical assistance regarding soft infrastructure such as insurance rate making systems.
When we look at domestic issues, under the government's initiative to be a more tourism-oriented country, various public and private measures are being taken to increase the annual number of foreign tourists coming to Japan to 20 million by 2020, the year of the Tokyo 2020 Olympic and Paralympic Games. In January, as part of our efforts to prevent traffic accidents involving foreign tourists, we conducted awareness-raising activities and produced English leaflets for safe winter driving, which call for extra care on snow-covered, slippery roads. With an eye on insurance companies' responses to foreign residents, we will also study ways to ensure sufficient information provision to foreigners.
(3) Response to emerging risks
In June 2014, the government's 'Strategic Headquarters for the Promotion of an Advanced Information and Telecommunications Network Society (IT Strategic Headquarters)' compiled a roadmap for a public-private vision of Intelligent Transport Systems (ITS). It expects the commercialization of limited automated driving system (Level 3) in the first half of the 2020s, and the trial use of full automated driving system (Level 4) in the second half of the 2020s.
In addition, expectations are being increasingly placed on the use of robots in fields such as nursing care, medicine, and agriculture, to address challenges brought by Japan's rapidly aging population and falling birthrate, in terms of the workforce availability and productivity. With the government's 'New Robot Strategy' adopted in February, various measures have been launched to achieve a society with the highest level of robot utilization in the world.
Forms and quality of risks are expected to change in line with the development of the new technologies and industries, such as the ITS including self-driving cars, robots, and regenerative medicine. While we have already established a project team to deal with issues regarding automobiles, we have started to analyze the patterns of expected accidents through verification testing of self-driving cars and to sort out the issues including what kinds of problems would be raised under current road traffic laws if we apply an auto insurance policy to those new accidents. Paying attention to the developments of related laws, we will further examine our responses to emerging risks, possibly expanding the scope of our study. As an expert on risks, we are determined to appropriately assess the changes, address legal challenges, and contribute to the promotion of new technologies through our member companies' provision of various products and services.
(4) Response to natural disasters
Japan is known to be one of the countries most prone to earthquakes and volcanic activity. In recent years, due to global climate change, it has been hit by natural disasters of unprecedented size, including localized torrential downpours. We will help make society more resilient to disasters through various measures such as activities for disaster prevention and reduction with research into natural disasters and local characteristics taken into account, and further strive to prepare for this 'new normal', the occurrence of unprecedented disasters.
In this field, we are engaged in a broad range of activities, such as our annual 'Exploration for Disaster Prevention' event, where schoolchildren learn about disaster prevention, crime prevention, and traffic safety through hands-on experiences like exploring their neighborhoods to create safety maps, and a project by the Ministry of Education, Culture, Sports, Science and Technology to promote learning activities in elementary schools on Saturdays. While collaborating with local communities including municipal governments and schools, we have developed a disaster prevention education program catering for different age groups from kindergarteners to elderly citizens. We will strengthen our efforts in disaster prevention and reduction education, reflecting local characteristics.
2. Participation in the Third UN World Conference on Disaster Risk Reduction
The UN conference was held in Sendai City, Japan, from March 14 till 18. The Great East Japan Earthquake seriously affected Sendai four years ago. The conference offered up-to-date information and knowledge about disaster prevention in Japan and around the world. Given that responses to natural disasters are priority issues for our industry from a mid- to long-term standpoint, we participated in a working session of the main conference as well as public forums. Taking advantage of the roles we fulfilled after the quake and the lessons learned from it, we seek to contribute to the development of a global disaster prevention and reduction culture.
(1) Participation in the main conference
More than 5,000 people from the 193 UN member states including government leaders, ministers, and other delegates, representatives of international organizations and authorized NGOs took part in the main conference organized by the United Nations to discuss global disaster prevention strategies.
On behalf of the Japanese industry, I, in collaboration with the Japanese government, participated in a panel discussion of the working session titled 'Disaster Risk Transfer & Insurance' on March 14. I made a presentation on Japan's earthquake insurance system, a legislated private and public sector risk-sharing scheme established under the Act on Earthquake Insurance, which was enacted in 1966. My presentation focused on the fact that due to the unified post-disaster responses of the industry, the total amount of claims paid for the Great East Japan Earthquake reached more than 1.2 trillion yen within a relatively short timeframe, and how effectively this helped rebuild the affected people's lives and contributed to the early recovery and reconstruction of the affected areas. The working session gives attention to various risk transfer techniques that have been developed to deal with aggregation risks associated with natural disasters. The participants shared effective risk financing methods employed by different countries, including natural disaster compensation systems.
(2) Participation in public forums
To offer information about the relevant activities in which we are engaged, we also participated in public forums on earthquake insurance and disaster prevention education.
Our session on earthquake insurance included speeches and panel discussions on Japan's earthquake insurance system and various measures taken by the industry to promote further penetration in the insurance market.
During the forum on disaster prevention education, we held an awards ceremony for the winners of our annual 'Exploration for Disaster Prevention' map-making competition, which marked the 10th anniversary of its inception. In addition, experts examined 'Exploration for Disaster Prevention' activities over the past 10 years with an eye to the decade ahead, and discussed the development of community-based disaster prevention education centering on children.
We will try to utilize the knowledge we have gained through these discussions for the promotion of earthquake insurance and risk awareness education in the future.
3. Other activities
(1) Response to the revision of the Insurance Business Act and Civil Code
Revisions to the Insurance Business Act are scheduled to be implemented at the end of May 2016. They include requirements to correctly confirm customer intent and to maintain the defined level of standards regarding agents and solicitors, in order to promote more appropriate insurance solicitation and sales, based on environmental changes. In February, public consultations were issued on relevant detailed rules and the revision of the Comprehensive Guidelines for Supervision of Insurance Companies. In order to establish a better system and therefore improve the service quality of our industry, we will continue expressing our opinions on these consultations while taking into account our business practices. At the same time, we will prepare for the addition and review of relevant guidelines as well as rules for harmonization and standardization of our business procedures so that the industry will be able to appropriately and practically comply with the new requirements.
Secondly, in February, the general assembly of the Legislative Council of the Ministry of Justice adopted the outline of the revision of the Civil Code (Law of Obligations). This includes matters that are expected to have a significant impact on general insurance business practices, such as application of the statutory interest rate, which is currently fixed though slated to become variable, when deducting interest in the present value calculation of damages. We will work towards appropriate responses in view of business practices.
Thirdly, regarding tax reform petitions for fiscal 2015, although we requested as a priority 'the elimination of double taxation on dividend income, etc.', the package of fiscal 2015 tax revisions includes reduction in the scope of the system to allow dividends and certain other income to be exempted from profit. For insurance companies, however, given the fact that this change could widely affect customers, an exception was made where, for dividends and certain other income from equities of which the insurer's ownership ratio is less than 5%, a 40% ratio of exemption from gross revenue will be permitted.
(2) Examination of new damage assessment methods for earthquake insurance
The follow-up meetings of the Ministry of Finance's 'Residential Earthquake Insurance Project Team' are examining new methods for damage assessments to prepare for the possible occurrence of giant earthquakes and ensure prompt payment of insurance claims. In the February 4 meeting, we reported on our plans including an expansion of the scope of properties of which damage assessment can be based on customers' self-reporting, a simplified assessment procedure using a special app for mobile devices to accelerate on-site investigations. The implementation of these measures will begin in fiscal 2015.
Earthquake insurance is designed to help stabilize the livelihoods of those affected by earthquakes as soon as possible. We will continue to work together with the government to ensure more prompt damage assessments.
(3) Prevention of insurance fraud and fraudulent claims
In April this year, we will launch a system to identify suspicious claims by enabling insurers to efficiently refer to records of past insurance claims. The system is designed to offer such information to general insurance companies at the early stages of accident responses. We will first provide information related to insurance types covering bodily injury, such as automobile insurance and personal accident insurance. As the system is effective in promptly identifying suspicious claims, we plan to expand its scope to other lines one by one thereafter.
We have also worked on the enhancement of an industry-wide database of such claims, as well as utilization of a system to visualize and analyze connections among fraudulent claimants. We will continue our efforts in this field to ensure more effective prevention of insurance fraud and fraudulent claims.
(4) Promotional activities for Compulsory Automobile Liability Insurance (CALI) and support activities utilizing profits from managing CALI premiums
Having a CALI policy, which is designed to assist traffic accident victims, is compulsory for all registered vehicles and motorbikes. In conducting public information activities on CALI mainly during March, Kie Kitano (an actress) calls for better understanding and recognition of the system. This year we are emphasizing three key messages concerning CALI: 'Drivers must have it', 'CALI provides relief to victims' and 'Never fail to renew it', with the catch phrase, 'I have a CALI policy, because I drive'.
In fiscal 2015, our activities, which are based on investment profits from CALI premiums, will newly include a study on causes and countermeasures regarding accidents involving elderly people, while also concentrating on providing assistance to victims of accidents and promoting accident prevention measures.
I have three months to go before the end of my tenure as Chairman of the GIAJ.
In April, the Seventh Mid-Term Business Plan will be launched. Taking advantage of our member companies’ knowledge and experience, we will make concerted efforts to implement the business plan, while fully recognizing the roles that the industry should exercise based on environmental changes.
Your continued support and cooperation are both greatly appreciated.