The challenges surrounding the newly launched AXA Nichidan Life Insurance Co. and Japan’s insurance industry do not elude Hisashi Ohgaki, the firm’s executive director and chief products and marketing officer.
Ohgaki said he believes Japanese insurers have a strong customer base and have done business based on the assumption that whatever they sell is best for customers. On the other hand, according to the executive, while foreign firms have done well as niche-fillers, the niches will not be there forever.
His candor might come from his past experience in the midst of an industry facing deregulation. Prior to assuming his current post in April, he spent 18 years at Industrial Bank of Japan and its subsidiary, IBJ DL Financial Technology, mostly as a derivatives and securitization expert.
“Life insurance fascinates me,” Ohgaki said in a recent interview. “The industry is facing the kinds of problems the banking industry went through about seven years ago, with deregulation looming around the corner.”
Ohgaki is not alone in predicting upcoming upheavals in the life insurance sector. Many industry officials say they are bracing for big changes that could completely redraw the industry landscape, including a 2001 deregulation measure that will allow both life and nonlife insurers to market casualty and medical insurance, which so far only foreign firms have been allowed to sell.
Ohgaki said that, as an insurer with a mix of Japanese and foreign characters that can touch all bases in terms of client outreach and product lineup, AXA Nichidan has the potential to become the first non-Japanese life insurer to enter the mainstream insurance market.
AXA Nichidan launched its operations in April. The previous month, Nichidan, or Nippon Dantai Life Insurance Co., which had been struggling to survive, came under a holding company that is 95 percent owned by the France-based AXA Group.
Prior to its acquisition by AXA, Nippon Dantai Life was a midsize life insurer having strong ties with Japan’s chambers of commerce and industry.
AXA Group is a major insurance and financial services group, with operations in more than 60 countries. AXA alone has had a small operation in Japan since 1994.
As for his shift from developing very technical financial products to more mass-marketable life insurance products, Ohgaki said he finds his current assignment, which is comparable to “making a (Toyota) Corolla,” just fascinating.
“Nichidan-AXA has 8 million policyholders, which means it has a stronger grip on retail customers than some of the nation’s biggest city banks,” he said. “And all the accounts we have are active, unlike some of the accounts at banks.”
He said he is optimistic about his firm’s business prospects, despite the perception of many that Japan’s life insurance market is saturated, with more than 90 percent of households said to be covered by life policies.
“Who (among them) is buying policies they really want?” Ohgaki asked. “Why is it that most of the domestic players keep losing 5 percent (in terms of amount of outstanding policies) every year, while foreign firms keep gaining 20 percent?
“The market might be saturated in terms of amount, but that doesn’t mean firms with good products cannot grow. I actually find the insurance industry a mountain of treasure.”
In citing an example of one product with such potential, Ohgaki predicted variable-rate life insurance will once again become popular in Japan, saying his firm will market that type of product sometime this year.
Variable-rate life insurance, a high-risk, high-return product in which insurance coverage varies according to investment performances of the insurers, came under heavy criticism in the early 1990s.
As the nation’s asset-inflated bubble economy burst around that time, many policyholders were left with bank loans that in many cases were tied together with the insurance product to finance their loss-incurring policies. A series of damages suits against life insurers and banks ensued.
But Ohgaki said he feels that, just as investment trusts — similar to mutual funds in the United States — have regained popularity in recent years, variable-rate insurance will also be popular again this year. Both in Europe and the U.S., the percentage of variable-rate insurance in pension assets is rising, he added.
“In our business, it is too late if it takes six months to develop a product,” he said, indicating AXA-Nichidan’s new product will debut soon.