A Japanese insurer is reaping the rewards of embracing the technological revolution, writes RGA's Greg Goodfliesh.
In Japan, the average life insurance customer is 47 years old, and will have a 70% chance of buying life insurance through a tied agent.
One start-up life insurer has become hugely successful, gathering a customer base where 75% are aged 39 or less (and 25% below the age of 30), by selling primarily online. How did the company do this?
It would be helpful to start with a little background on the unique history of the Japanese life insurance industry. After the World War II, all industries in Japan, including insurance, entered a massive rebuilding stage.
To allow domestic insurers to grow and thrive, Japan’s Ministry of Finance eliminated all competition. Foreign companies were not permitted to do business in Japan.
Domestic companies were allowed to sell only a particular list of life insurance products, at a set price. With no ability to differentiate by product or price, life companies sought to distinguish themselves by racing to build massive tied agent channels.
True competition in the Japanese life insurance industry did not begin until 1980, when revisions to the Foreign Exchange and Foreign Trade Act eased restrictions on foreign direct investment in Japan.
This culminated in the 1995 revision to the Insurance Business Act that liberalised the life insurance market by letting companies introduce a wider range of products and giving greater freedom to fix rates.
In 2008, life insurance in Japan was first sold on the internet. Lifenet’s 64-year-old president, Haruaki Deguchi, saw this new technology could be an opportunity to pursue a younger market. However, there were not yet any material internet-only life insurance success stories anywhere in the world to emulate.
So Deguchi rolled up his sleeves and had Lifenet conduct fundamental research into Japan’s life industry. He found Japan’s life market consisted primarily of expensive and complicated products sold by agents who had not received adequate training.
With this analysis in hand, Lifenet set out to develop simple life products with transparent definitions and good value, that could be sold over the internet and would appeal to younger buyers.
In May of 2008, the company launched its first two products: Term Life and Whole Life Medical. Lifenet added a long-term disability income product in February 2010, then, in October 2012, the company launched a medical reimbursement product that includes coverage for advanced medical care treatments.
Lifenet also used some interesting techniques to raise awareness of its brand within its target market. First came television advertisements and strategically placed print ads in Tokyo’s crowded subway stations, along with the continual optimisation of online ads. From there Lifenet moved to raising and optimising its profile on Facebook, Twitter, and other social media outlets.
The company hosts a well-read, informative blog that is populated by more than one-third of its employees. Deguchi also gives lectures or speeches about 20 times per month, which has earned him many Twitter followers.
Very recently, one of Japan’s largest ebook stores began giving its customers free coupons redeemable for a Manga (comic book) about the history of Lifenet. Could this technique work in other parts of the world?
This strategy has enabled Lifenet to grow quickly. Two years after its 2008 launch, it had already achieved more than 50,000 customers, and by the end of November 2012, had more than 150,000 customers.
The company is continuing to grow quickly: many of its current customers are in the coveted 39-and-under age bracket (50% first-time buyers), which will almost certainly lead to repeat sales.
In addition, in March 2012 Lifenet became a member of the Tokyo Stock Exchange’s Mothers section (the market for stocks of high-growth startup companies), which has provided the company with improved access to capital to fund its rapid growth.
A recent survey of more than 12,000 internet customers found Lifenet’s approval rating to be the second best in Japan’s entire life insurance industry. As Lifenet’s name recognition continues to grow, competitors must be worried.
Did Lifenet meet its goal of having products that represent good value? One way to analyse this is to look at premiums charged on a ¥10m (£70,000) face amount, 30-year term product sold to a 30-year-old standard male.
Lifenet charges roughly ¥2,600 (£18) per month for the life of the policy. Lifenet’s traditional competitors are charging closer to ¥4,000 (£28) per month for the same term life cover.
Lifenet achieved its growth by successfully challenging one of the life insurance industry’s fundamental core beliefs: “Life insurance is sold, not bought”. It is also finding success in selling LTD products online – a feat few (if any) insurers in the world have been able to accomplish.
Maybe more important, Lifenet has found a different approach, that appeals directly to the under-served market without high advertising costs. Could the UK be tempted to move away from the current norms?
