Insurance in Japan: Market and IT Overview

by Neil Katkov, PhD, July 28, 2005


Tokyo, Japan July 28, 2005

While domestic players in the Japanese insurance market are struggling to grow, foreign entrants have aggressively expanded market share. Foreign insurers currently hold 21.6% of the Japanese market by premium, and are poised to expand this share to 26.2% by 2009.

Japan, the world's second largest economy, is home to a sizable, and very mature, financial services sector. This can be seen clearly in its insurance market, which has been stuck in slow-growth mode for years. Yet firms are not standing still in the face of this challenge. The last few years have seen a wave of mergers among both top tier and second tier firms, the introduction of whole new product ranges in response to changing market needs, and the adoption of new channel and marketing strategies. Celent痴 new report, , provides an overview of this important market and a high-level look at some of the key organizational and IT-related issues for both domestic and foreign insurers. Future Celent reports may examine specific elements of this market more closely, especially strategic responses to competition and a soft business environment.

The mature Japanese insurance market is approximately US$338.1 billion in premiums today, and is projected to expand gradually to US$364.5 billion in 2009. Celent estimates that on average the industry spends approximately 1.7 percent of premium on IT. Investment levels vary widely between sectors, with non-life carriers spending an average 2.5 percent of premium on IT, compared to a low 1.5 percent in the life industry. Celent estimates that total insurance IT spending in Japan is approximately US$5.7 billion and, due to the mature state of the industry as well as cost pressures, will rise only slightly to US$6.0 billion in 2009.

"Foreign carriers in Japan have been successful in responding to the changing needs of an aging population and in leveraging alternative distribution channels and aggressive marketing techniques," comments Neil Katkov, senior analyst at Celent and author of the report. "Domestic firms must respond to this challenge by developing innovative products and the technology infrastructure to effectively support change."

A key challenge for these firms is how, in an IT environment based on rigid legacy systems, to achieve the flexibility and speed necessary to compete in a changing and intensely competitive market. Insurers in Japan must strategically adopt new technologies to extend their mature IT infrastructures to effectively support product innovation, multi-channel distribution, diverse sales networks and third-party product suppliers.

The report is 19 pages long and contains 12 figures and tables. A table of contents is available here.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


Tokyo, Japan July 28,  2005

Insurance in Japan: Market  and IT Overview 

Return to report Abstract

Executive Summary 3
Introduction 4
Market Overview 5
  Market Size and Projected Growth 5
  Life Insurance Market 6
  Non-Life Market 7
  Foreign Entrants Have Significant Share 9
IT Spending 11
  Projected Spending 11
  IT Spending by Category 12
Japanese Insurers: Organizational and IT Challenges 14
  Organizational Issues 14
  IT Challenges 15
Challenges For Foreign Insurers 16
Concluding Thoughts: "The Four A's" in Japan 17
Objectivity & Methodology 18

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