The GIAJ Chairman's Statement (Translation)
（June 30, 2017）
On May 29th, the General Insurance Association of Japan (GIAJ) celebrated the 100th anniversary of its foundation. Upon taking up the post of Chairman of the association at this milestone, I would like to express my opinions as follows:
1. Looking back on the past initiatives
On May 29th, 1917, the Joint Fire Insurance Association of Japan, our predecessor, was established with 42 domestic and foreign member insurers. Its initial objective was to ensure stable management of general insurers amid intensifying competition, through various arrangements such as appropriate fire insurance rate setting and the maintenance of orderly insurance solicitation. Although the number of member companies was greater than that of today, the size of Japan’s general insurance market was still small. With written premiums totaling about 46 million yen, marine and inland transit insurance were the main lines of business.
At that time, Japan was in the midst of the First World War. While the war saw the development of Japan’s heavy and chemical industries, including shipbuilding and steel production, which led to a remarkable economic upswing, this was soon followed by galloping inflation and ensuing recession. Japan had also witnessed great devastation over the course of events such as the Great Kanto Earthquake, the Showa Financial Crisis, the war with China, and the Pacific War.
Following the post-war economic recovery, Japan entered an age of mass consumption and a period of high-growth economy in the 1950s. Despite disruptions caused by incidents such as the oil shocks, a generally stable growth over the medium-term translated into a higher standard of living of the Japanese people. In the 1980s, the country enjoyed an economic bubble boom.
While economic growth has remained more or less stagnant since the burst of the bubble, Japanese society and economy are facing major changes, including innovations in information technology (IT) and globalization. Moreover, large-scale disasters such as earthquakes represented by the Great East Japan Earthquake of 2011, typhoons, and heavy rainfall are observed more frequently.
The general insurance industry has been moving in pace with these ongoing changes to fulfill its role as an important part of the country’s social infrastructure. Examples include the establishment of the Compulsory Automobile Liability Insurance and development of voluntary automobile insurance to support the advancement of motorization, expansion in product line-up to cater for the diversified needs of society, as well as the creation of the Earthquake Insurance System along with industry-wide dedication to restoration efforts in response to the occurrence of large-scale quakes.
In order to provide even greater stability of operations, insurers have enhanced their financial strength and strived to promote general insurance by improving solicitation processes, which include the agent system.
While insurers have taken steps to enhance customer convenience by diversifying products and services after deregulation, insufficient preparation led to problems such as underpayment of insurance claims. Based on the lessons learned from such experience, we have reviewed our business management systems and taken customer-oriented measures to improve the comprehensibility of insurance coverage, simplify solicitation documents, revamp the examination scheme for insurance solicitors, and develop systems to ensure proper payment of claims.
Through these initiatives, the total premiums written in fiscal 2015 amounted to about 8.4 trillion yen, more than 200 times greater than that of 100 years ago (based on adjustments for inflation and other factors). Overall, we can say that our industry has grown steadily in line with progressing society.
2. Direction of our future initiatives
New forms of Information and Communication Technology (ICT), such as Internet of Things (IoT), Big Data, and Artificial Intelligence (AI), has increasingly been put to practical use recently and will continue to evolve in the coming years. Some researchers even predict that in 2045, a "technological singularity" will occur when AI outstrips the human intellect. Such progress in ICT will bring about innovations to every aspect of society, impacting people's lives and the way of businesses. Accordingly, the types of risks linked to general insurance are expected to change as well.
In addition, drastic demographic changes are projected both at home and abroad. In Japan, due to its rapidly aging and shrinking society, the population is forecast to drop below 100 million in 2053, according to the National Institute of Population and Social Security Research. Meanwhile, the world’s population is predicted to reach 9.8 billion by 2050 from the current 7.6 billion. Along with this increase, population distribution is also likely to change significantly.
In terms of environmental issues, climate change could further accelerate. A white paper published by the Ministry of the Environment suggests that by the end of the century, the average global temperature will rise between 2.6 to 4.8 degrees Celsius if greenhouse gas emissions continue to increase. Oceans would also bear the brunt of climate change with warming ocean temperatures, acidification, and rising sea levels. Disaster risks caused by natural hazards such as heat waves and extraordinarily heavy rainfall are also expected to increase.
The above technological innovations, global demographic shifts, as well as environmental impacts of climate change are likely to bring about changes in domestic and international societies as well as markets at an unprecedented rate.
Of course, certain things will remain unchanged.
Surely, insurers will always be valued for offering high-quality, highly convenient products that meet customer needs, especially when delivered with the "Omotenashi" spirit (Japanese-style courteousness). Furthermore, our role as "risk bearers" will remain essential, as risks diversify and grow in complexity amid changes in the social landscape.
We, the general insurance industry, are determined to better serve our customers through further strengthening public confidence and developing ourselves in response to a transforming society.
Combining our past 100 years of development with these visions, the following four directions will be crucial for our future initiatives.
(1) A more forward-looking response to environmental changes
Changes in the social environment will entail ever-accelerating changes in risks. We are responsible for responding to such changes in a flexible manner and fulfilling our role as an infrastructure that helps build a worry-free, safe society through provision of insurance products that cater for different types of risk. While the importance of this responsibility has and will remain unchanged, it is essential for us to advance appropriate measures in a more forward-looking manner.
(2) Further "customer-oriented" business operations
General insurers have continued to pursue higher customer satisfaction by improving solicitation, payment processes, and quality of business administration across the industry.
By utilizing these measures, it is necessary to pursue a more "customer-oriented" business so that we can be of better help to our customers. For example, we will increasingly be required to offer high value-added services, including contribution towards accident and disaster prevention based on our knowledge and experience regarding risks.
(3) Establishment of a more robust and stable general insurance system
To ensure that general insurers can fulfill their most fundamental function of properly paying claims in the event of a loss, it is imperative that they enhance their financial strength and prepare for major disasters including large-scale earthquakes.
General insurance itself is a mechanism that collects, pools, and distributes funds (via premiums and claims) in a fair and equitable manner. Therefore, it is important to boost measures that build trust between customers and insurers, while at the same time raising the level of public confidence in the general insurance system.
(4) Strengthening cooperation with relevant parties and issuing opinions to enhance our standing both at home and abroad
For the past 100 years, Japanese society and economy have developed markedly. Our initiatives have focused on fulfilling our roles domestically to cater for the changing needs.
However, in order for the Japanese industry to steadily grow and contribute to society amid changing demographics and market balances across the globe, we must become a driving force in the market both at the domestic and international levels by further enhancing our presence.
Therefore, it is essential for us to closely cooperate with domestic and relevant foreign parties, establish mutual trust, and continue to properly express our stance on various issues.
3. Our initiatives for the coming 12-month period.
We believe that for the coming year, it will be important to solidify our foundations towards the commencement of our 101st year.
First of all, we are determined to finalize the implementation of key measures defined in our Seventh Mid-Term Business Plan (from fiscal 2015 to 2017) as we approach the close of its final phase. The next Mid-Term Business Plan (from fiscal 2018 to 2020) will be formulated in consideration of the previously mentioned four directions regarding our upcoming initiatives. In particular, it is of utmost importance to review our operations and improve the quality of our business administration from a customer-oriented viewpoint. We will explore the possibilities of any industry-wide initiatives to support our member companies.
Centered around the priority issues of the Seventh Mid-Term Business Plan, and in view of the next business plan, concrete measures will include the following:
- Increasing the number of solicitors accredited with "General Insurance Total Planner", our most prestigious qualification for insurance solicitors.
- Identifying best practices regarding business operations of our member companies.
- Reviewing GIAJ's business continuity plan in linkage with those of our member companies.
- Enhancing our insurance fraud and fraudulent claims prevention system.
- Sharing our experience with the Asian region to contribute to the sound development of its general insurance market.
General insurance, like education and medical services, provide the infrastructure to support building a worry-free and safe society. To fulfill this role, a high level of trust between customers and insurers is indispensable. I recognize that my crucial mission as Chairman is to ensure that general insurers improve the quality of every aspect of their business operations from a customer-oriented perspective, including the contents of products and services, insurance solicitation, and payment of claims, in order to further consolidate trust in our industry.
I am determined to make sincere efforts. Your continued understanding and cooperation are both greatly appreciated.