| Personal assets in Japan had been managed through bank deposits and subscription to life insurance. Because guaranteed returns on insurance policies were especially relatively attractive in the case of life insurance policies, there had been excess subscription in Japan to insurance policies. Since the collapse of the bubble economy, however, consumers have rapidly shifted away from life insurance. Not only is growth in new subscriptions sluggish, there is also an increase in the surrender of existing policies. The biggest reason is that life insurance companies are no longer able to secure guaranteed yields for policyholders due to the deterioration of asset activities, and there have been failures seen among life insurance companies. The series of bankruptcies has resulted in increased distrust of life insurance companies by consumers. In 2003, the Japanese government revised the Insurance Business Law in order to enable insurance companies to lower the guaranteed returns on insurance policies before it was forced into bankruptcy. However, out of fear of triggering massive surrenders, no life insurance company has yet lowered the rates of return promised to policyholders. How to curb the shift away from life insurance is the biggest issue being faced by the life insurance industry. |
