As Japan’s life insurance market matures, many companies are looking overseas for opportunities to expand.
One exception is MetLife Insurance K.K., whose chief executive says Japan offers scope for growth, both from new opportunities and from customers dissatisfied with their current insurer.
“We see Japan as a growth opportunity because of the macro environment, consumers who view their current adviser with a lack of trust, if you will . . . and we felt that this is the important opportunity to leverage the power of Metlife’s brand,” said CEO Sachin Shah in an interview in August.
He said the group is in the Japanese market for the long-term.
In July, the company changed its name from MetLife Alico Life Insurance K.K., dropping the reference to its predecessor entirely. It believes emphasizing the venerable MetLife brand will build trust with Japanese consumers in light of its 150 years of history and 64,000 employees in 50 countries.
“I think it’s very important for people to realize this rebranding wasn’t just simply a logo change, but it was really a signal that we are even more committed to the Japanese market because we see it as a growth opportunity,” Shah said.
To reassure consumers who are concerned that foreign insurers will quit Japan without warning, the CEO says MetLife’s culture of keeping promises is in its DNA. Shah points to the organization’s solid financial strength, which is rated AA- by credit agency Standard & Poor’s — the highest of any life insurer in Japan.
The $10 billion committed to buying Alico Japan also shows the degree to which it is committed to the Japanese market, he said.
“We’re going to be here for a long time, because we made a big commitment to come into this market,” Shah said. “We manage our company to make sure we’ll be here for another 150 years.”
MetLife Inc., its U.S. parent, purchased rival American Life Insurance Co. (Alico) in 2010, and the latter’s Japanese operation, known as Alico Japan, became what is now MetLife Insurance K.K.
Shah arrived in Japan in 2011, dispatched by the parent company initially to be the chief operating officer of MetLife Alico. He became CEO in August 2013.
Before coming to Japan, Shah was responsible for international strategy, new business development and M&A at MetLife Inc. And in that capacity, Shah decided Japan, the world’s second-largest life insurance market after the United States, had to be a key part of the insurer’s international strategy.
“There’s no way to become big internationally and ignore Japan. We had to be in Japan and we had to become big in Japan. That was a key part of our strategy,” Shah said.
Shah’s bullish view defies the declines in the Japanese life insurance market accompanying its shrinking population. The total outstanding value of personal contracts had contracted from its peak of ¥1.496 quadrillion in 1996, to just ¥862 trillion, or 58 percent of the peak, as of 2012, according to figures compiled in February by Daiwa Institute of Research.
The maturing domestic market has prompted local players to seek growth opportunities elsewhere.
In a recent move, Dai-ichi Life Insurance Co. in June announced it would purchase Protective Life Corp., a U.S. life insurer, for ¥582 billion, which would be the largest overseas acquisition ever made by a Japanese insurer.
In its medium-term business plan, Meiji Yasuda Life Insurance Co. allocated ¥250 billion for the acquisition of overseas businesses and is currently screening candidates, with a focus on Asia and central and eastern Europe, a company spokesman said.
Shah agrees it is “appropriate by many measures” to call Japan a mature market. He foresees a low market growth rate at 2 to 3 percent annually, but says his company aims to grow a “multiple” of that by leveraging opportunities manifesting themselves in Japan.
These include demographic change, the growing concentration of wealth among the elderly, growing interest in health in retirement, inheritance planning and longevity.
“All are creating real needs that are not getting fulfilled by the traditional government social security benefits that are provided,” Shah said.
In taking advantage of this, MetLife Insurance’s fundamental strategy is to build trust to attract Japanese consumers. Shah said trust is a major factor in how Japanese choose a life insurer, but that many may distrust their current insurer.
“What we’ve seen very consistently over the last two to three years in our research is that trust is the number one factor for consumers when they buy insurance in Japan. That makes perfect sense when you think about what insurance is. Insurance is really a promise,” Shah said.
“And this may be a surprise, but three quarters, or 75 percent, of consumers say they do not trust (their) current insurance adviser or a company.” He gave no explanation.
“So that’s very significant in that (Japan is) a low growth market but there’s tremendous opportunity to appeal to consumers who are right now not trusting their current company and in essence create growth for that company who can attract those consumers.”
The company has found that about 50 percent of the consumers who buy medical insurance are switching from another company, and about one-third are buying it for the first time.
“So a significant portion of the market, even much bigger than the new customer, is people that are switching because they don’t trust their current company, they don’t feel like they have the best solution,” Shah said.
Japan’s life insurers traditionally relied on a large sales force visiting customers individually and establishing strong personal ties. But Shah says consumers’ needs have diversified, and companies must now appeal to them through multiple channels.
“We have career agents, independent agents, bank, direct marketing, website . . . We are not relying on any one channel to sell insurance,” he said.
“We have multiple channels. It allows us to reach more consumers and allows us to give consumers choice in how they reach us.”
Growth in sectors such as the elderly, single people, and married couples with no children are all demographic shifts that present opportunities, and these trends have changed the need for life insurance.
“Companies that are still operating in the traditional model from 20 or 30 years ago, they clearly are going to be challenged to maintain their customer base,” Shah said.