Bancassurance in Japan: Lessons from Europe and the US

Tokyo - 29 February 2008

The deregulation of bancassurance in Japan offers many opportunities for growth in an otherwise stagnant market. Banks will capture between 20% and 25% of new business in life products, between 5% and 15% in personal non-life products, and approximately 80% percent in annuities by 2012. However, the path ahead will not be easy and will require significant investment in people, processes, and technology.

Liberalization of Japan’s bancassurance market has been one of the largest changes to affect the country’s insurance industry in the past few years. In a new report, Bancassurance in Japan: Lessons from Europe and the US, Celent examines the Japanese life and non-life insurance industries against the backdrop of mature bancassurance markets abroad and analyses the critical factors for success.

Insurers interested in understanding the potential of this channel can look toward several global examples. In Europe, supportive regulatory frameworks, well-developed banking networks, simple financial products, and strong relationships with banking advisors have turned bancassurance into a success story. By contrast, the US bancassurance market has performed disappointingly, in large part because participants have targeted sales of profitable products without recognizing the amount of support needed to sell these products at significant volumes. Japan shares traits with both the European and US financial services environments.

"In recent years, insurers in Japan have introduced agent extranets and other technologies in order to automate the sales cycle," says Catherine Stagg-Macey, co-author of the report and senior analyst with Celent’s Insurance Group. "This has given insurers experience with the kinds of technologies that can help them lower distribution costs while maximizing profit margins."

"Japanese banks's success in selling annuities would seem to augur well for the future of the bancassurance market now that it has been fully deregulated," adds Neil Katkov, co-author of the report and managing director of Celent’s Asia Research Group.

This report analyses the potential of the new bancassurance market in Japan by considering the structure of the Japanese market and drawing on the experience of this channel in both Europe and the United States. It explores what the Japanese bancassurance market will look like in a few years, in addition to examining best practices insurers can adopt in order to effectively compete in this new channel.

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