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Case Study on Japanese Internet Life Insurers
2009-10-08JUNG, Seung-Hee
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Case Study on Japanese Internet Life Insurers
Overview and Growth Outlook for online Sales Channels
online sales channels offer the advantages of easy accessibility, low premiums, and the ability to distribute useful information. As a result, life insurance sales through the internet are gradually increasing in major developed countries including the U.S. and Japan.
However, given the complexity of life insurance products and legal restrictions, the internet is used by life insurers primarily to distribute information and provide services rather than to sell products.
The continuing growth of the internet and the growing customer need for online life
insurance registration is expected to drive increasing use of the online channel by younger customers and for the sale of simple products.
In response to the growing importance of online sales channels, life insurers in major countries are implementing online strategies, including the establishment of online divisions or separate online companies, and expanded use of online insurance brokers.
Analysis of Internet Life Insurers in Japan
Specialized online life insurers are not yet widespread, even in major developed countries, but recently, two online life insurers were established in Japan.
SBI AXA (Established in April, 2008)
- SBI Holdings, which focuses on online finance, and AXA Japan, majority-owned by the global insurance group AXA, set up a joint venture to leverage each firm’s strengths.
- Three types of products that have low premiums and are simple, including term life
and health insurance, are offered, and every step of the sales process is handled online.
- Although the internet will be the primary sales channel, SBI Holdings’ affiliates will be used as agencies, and the in-person channel will be used as well.
- After beginning business in April, 2008, sales have risen rapidly, but it will likely take
a long time to reach the level of sales and profits of existing life insurers.
Lifenet (Established in June, 2008)
- Lifenet was established as an independent company rather than as a subsidiary of an existing financial firm.
- Currently, two types of products are offered (term life, health). The products are designed to be simple and a homepage offering ample information has been launched.
- Lifenet currently relies solely on the online channel, but is exploring ways of contacting customers offline in order overcome the limitations of the online channel.
- Sales have grown quickly, primarily for term life insurance, which is impressive given
Lifenet’s independence and lack of an established customer base.
Implications of the Expansion of the online Sales Channel
Currently, the use of the online channel by life insurers is extremely limited in comparison to banks, securities firms and non-life insurers. However, the customer need for the online channel is growing, and life insurers are increasingly likely to begin to treat the internet as a separate and important sales channel.
The profitability of the Japanese online life insurers examined here remains uncertain, but they have high growth potential due to the low prices and convenience that they offer.
- However, only simple products, such as term life and health insurance, can be sold online, and the risk of adverse selection and the scope of protection cannot be expanded.
As a result the online business faces some limits in growth.
Independent, specialized online life insurers offer greater convenience and are more price competitive, and are thus likely to be more effective than the current model of establishing an online division within an existing insurer.
Although the online channel offers high growth potential, the establishment of new online companies by existing life insurers will create conflicts with their current agents and is thus a risky strategy.
- However, small-to-mid size life insurers which have less competitive agency channels, may seek to expand the market by offering low-priced products through specialized online sales channels.
As a result, the establishment of online life insurers in Korea is more likely to be led by new market entrants, which will need to focus on building consumer confidence and brand recognition.
Overview and Growth Outlook for online Sales Channels
online sales channels offer the advantages of easy accessibility, low premiums, and the ability to distribute useful information. As a result, life insurance sales through the internet are gradually increasing in major developed countries including the U.S. and Japan.
However, given the complexity of life insurance products and legal restrictions, the internet is used by life insurers primarily to distribute information and provide services rather than to sell products.
The continuing growth of the internet and the growing customer need for online life
insurance registration is expected to drive increasing use of the online channel by younger customers and for the sale of simple products.
In response to the growing importance of online sales channels, life insurers in major countries are implementing online strategies, including the establishment of online divisions or separate online companies, and expanded use of online insurance brokers.
Analysis of Internet Life Insurers in Japan
Specialized online life insurers are not yet widespread, even in major developed countries, but recently, two online life insurers were established in Japan.
SBI AXA (Established in April, 2008)
- SBI Holdings, which focuses on online finance, and AXA Japan, majority-owned by the global insurance group AXA, set up a joint venture to leverage each firm’s strengths.
- Three types of products that have low premiums and are simple, including term life
and health insurance, are offered, and every step of the sales process is handled online.
- Although the internet will be the primary sales channel, SBI Holdings’ affiliates will be used as agencies, and the in-person channel will be used as well.
- After beginning business in April, 2008, sales have risen rapidly, but it will likely take
a long time to reach the level of sales and profits of existing life insurers.
Lifenet (Established in June, 2008)
- Lifenet was established as an independent company rather than as a subsidiary of an existing financial firm.
- Currently, two types of products are offered (term life, health). The products are designed to be simple and a homepage offering ample information has been launched.
- Lifenet currently relies solely on the online channel, but is exploring ways of contacting customers offline in order overcome the limitations of the online channel.
- Sales have grown quickly, primarily for term life insurance, which is impressive given
Lifenet’s independence and lack of an established customer base.
Implications of the Expansion of the online Sales Channel
Currently, the use of the online channel by life insurers is extremely limited in comparison to banks, securities firms and non-life insurers. However, the customer need for the online channel is growing, and life insurers are increasingly likely to begin to treat the internet as a separate and important sales channel.
The profitability of the Japanese online life insurers examined here remains uncertain, but they have high growth potential due to the low prices and convenience that they offer.
- However, only simple products, such as term life and health insurance, can be sold online, and the risk of adverse selection and the scope of protection cannot be expanded.
As a result the online business faces some limits in growth.
Independent, specialized online life insurers offer greater convenience and are more price competitive, and are thus likely to be more effective than the current model of establishing an online division within an existing insurer.
Although the online channel offers high growth potential, the establishment of new online companies by existing life insurers will create conflicts with their current agents and is thus a risky strategy.
- However, small-to-mid size life insurers which have less competitive agency channels, may seek to expand the market by offering low-priced products through specialized online sales channels.
As a result, the establishment of online life insurers in Korea is more likely to be led by new market entrants, which will need to focus on building consumer confidence and brand recognition.
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