Earthquake insurance premiums will rise by an average 15.5 percent in July as a result of a rethink after the March 11, 2011, catastrophe.
Seismic insurance covers damage inflicted on houses and household goods by quakes and quake-triggered disasters such as tsunami. As fire insurance does not cover fires caused by quakes, property owners are expected to take out seismic and fire insurance at the same time.
The two insurance programs are managed jointly by the government and private property and casualty insurance companies known here as nonlife insurers.
Following the 2011 Great East Japan Earthquake, which ravaged parts of the Tohoku region, a Finance Ministry report called for a drastic review of the earthquake insurance system. In March last year, the nonlife insurance industry notified the Financial Services Agency of its plans to raise seismic insurance premiums.
Under the coming changes, premiums will increase in most cases, although they will drop for homes built using certain types of structures or in less quake-prone areas. The annual premium for a one-year, ¥10 million contract for a quake-resistant condominium in Tokyo will rise by ¥3,300 to ¥20,200.
At the same time, discount rates for quake-resistant homes will be expanded from the current 20-30 percent to 30-50 percent.
The aim of the revisions to the seismic insurance system is to secure sufficient reserves for insurance payments. As of March 2013, insurance payments for the March 2011 quake totaled ¥1.2 trillion, the largest figure on record.
But as the revisions do not take into account damage from a possible huge Nankai Trough earthquake off the Pacific coast, the government and the nonlife insurance industry plan to draw up estimates and consider another increase in premiums.
The number of people covered by quake insurance remains limited. At the end of last October, some 15.5 million insurance contracts were in force.
Three years after the Tohoku mega-quake and tsunami, industry officials warn that popular interest in seismic insurance is waning. In particular, elevators, hallways and other areas shared by residents in condominiums are often not covered by quake insurance.