The Japanese branch of American Home Assurance Company on Sept. 2 begins mail-order sales of differentiated-rate auto insurance, the first of its kind in Japan.
The U.S. firm is able to sell the insurance because the Finance Ministry lifted a ban on differentiated-rate products in August, following a Japan-U.S. insurance accord in December.
American Home’s announcement heralds a new age of rate competition in the auto insurance industry, though it is expected that domestic firms will remain bound by restrictions until next July. While domestic rivals admit there is an advantage in offering low premiums for good drivers, they doubt that the new service can offer much quality, considering the scarcity of American Home’s service centers across the country.
American Home will set up eight service centers in major cities by the end of this year to handle auto accidents. The Tokio Marine and Fire Insurance Co., the leading domestic firm in the industry, has about 200 centers.
Determining premiums for the new insurance places much less emphasis on individual risk factors than is the case with premiums of rival firms. As a result, 57 percent of all drivers in Japan would be able to save 15 percent or more in premiums and some can save 30 percent or more, according to American Home’s calculations.
But premiums for relatively risky drivers, such as those under the age of 25 and over about 75, are up to 35 percent higher than those charged by domestic rivals, according to American Home. The difference between the maximum and minimum rates is wider than that of conventional insurance but remains not more than threefold regardless of a driver’s age. The maximum difference falls within the limit set by the Finance Ministry guidelines last June, said Takayoshi Yokoyama, president of American Home, at the press conference Sept. 2.
Risk factors reflected in the premiums include the driver’s age, sex, driving record and location of residence. Also considered are vehicle types and their safety features such as dual air bags and anti-lock brake systems. To reflect regional differences, American Home divides the whole country into seven areas.
According to a sample calculation, a 43-year-old man in Tohoku, who pays 47,710 yen a year for a conventional auto insurance package, would have to pay only 31,790 yen a year for the new insurance. If he lives in Hokkaido, he would be charged 36,810 yen annually.
As for differences in gender, young women are charged less than men in their same age bracket and are never charged higher premiums than men if they meet the same conditions. The new insurance has nine age categories, but American Home declined to reveal details. To calculate risk regarding age and gender, the firm used data in the U.S. because it is not available in Japan.
For region-specific risk, it used data of the Automobile Insurance Rating Organization of Japan.