13th in an occasional series of articles on financial deregulation

Staff writer

When American Home Assurance Co. began marketing Japan’s first differentiated-rate auto insurance last September, Manuel Eichmann, head of Zurich Insurance Co.’s Japanese branch, wasn’t worried.

Eichmann said the Swiss insurer was already preparing its new version of auto insurance, a product that symbolizes the ongoing deregulation of Japan’s nonlife insurance market. “Every consultant says, ‘rush, rush, rush.’ But when you rush, you make a lot of mistakes,” Eichmann said.

Although his firm did not come first, “I still believe the first three are the first movers,” he said in a recent interview. In January, Zurich Insurance became the second nonlife insurer in Japan to introduce differentiated-rate car insurance. As is often the case in this industry, Eichmann declined to disclose the number of contracts his firm has obtained. But he said he is “pretty happy” with the results so far and “the future looks good.”

Differentiated-rate auto insurance sets premiums based on individual risk factors such as age, car type, driving record and place of residency. Traditionally, there have been limited variations in auto insurance premiums because insurers were legally bound by a rate range set by the Automobile Insurance Rating Organization of Japan.

The government partially eased the regulation last September to allow differentiated-rate products, and will scrap it almost entirely in July.

More nonlife insurers, including major domestic ones, are expected to eventually follow American Home and Zurich in marketing differentiated-rate auto insurance. Zurich Insurance’s new product enables safe drivers, especially those aged 30 and older, to save more than 30 percent. The firm charges higher rates for risky drivers.

The firm says it can cut costs by employing direct-marketing methods in which no sales agents are involved. In direct marketing, customers who become interested in products through advertising call a toll-free number to contact the company. Direct marketing “was our (initial) strategy and continues to be our strategy,” Eichmann said.

The Japanese nonlife insurance unit of the Switzerland-based Zurich Group was set up in 1986. In fiscal 1996, which ended last March, the Japan branch posted 6.6 billion yen in premiums in the 10.9 trillion yen domestic market. Eichmann was assigned to the branch seven years ago.

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