Foreign nonlife insurers called Friday for a review of Japan’s insurance rating system that would allow insurers to set premium rates through their own efforts. The Foreign Nonlife Insurance Association of Japan voiced concern that debate surrounding reform of the current rating system, which was pledged in a bilateral insurance agreement with the United States last December, is falling short of initial hopes of paving the way for full liberalization of premium rates.
Currently, Japan’s nonlife insurance firms are required to set their insurance premium rates based on the calculations by nonprofit rating organizations, which use data collected from member insurance companies to set standard rates.
The association expressed concern that discussions at a Finance Ministry panel currently studying the issue so far seem to be leaning toward preserving some regulations over setting premiums. “We believe the basic principle behind current efforts to reform the insurance system must be that only by offering a wide range of choice in products and pricing through creativity and effort can insurers be welcomed by consumers,” according to the association.
Japan and the U.S. agreed that starting in August 1998 there would no longer be an obligation to set nonlife insurance premium rates based on the calculations of the rating organizations.
Foreign insurers have said they would like to see the organizations transformed into companies that specialize in data collection and analysis.
A panel under the Insurance Council, an advisory body to the finance minister, is currently studying what role the organizations should play after this change, along with other deregulation planned in line with Prime Minister Ryutaro Hashimoto’s proposed Big Bang of financial system reforms.