Overview of Life Ins. Industry in Japan

Transcription

1 FALIA Invitational Seminar in Japan Risk Management Course Overview of Life Ins. Industry in Japan November 9th, 216 Genjiro Saito Chief, International Affairs The Life Insurance Association of Japan

2 Contents I Basic Information of Japan II Japan s Position in the World Life Insurance Market III Overview of Life Insurance Business in Japan IV Brief History of Japanese Life Insurance Industry V Addressing the issues VI The Life Insurance Association of Japan 2

3 I Basic Information of Japan

4 I Basic Information of Japan 1. General Information Name Japan Area 377,914 km2 (rank 6 th ) Population 127 million (rank 1 th ) Capital Language Tokyo Japanese Main Religion Shinto/Buddhism Government Trade Prime Minister: Shinzo Abe (Liberal Democratic Party) Import: crude oil, petroleum products, LNG (liquefied natural gas), clothes, coal, non-ferrous metal, semiconductor electric component Export: automobile, auto component, steel, semiconductor electric component, boats and ships, plastic, engines and turbines 4

5 I Basic Information of Japan 2. Economic Trends (1) Changes in Nominal GDP (2) Stock Price (The Nikkei Stock Average) (yen trillion) Source: IMF - World Economic Outlook Databases, Cabinet Office Nominal GDP (215): trillion yen Growth Rate (215): 2.46% GDP per capita (215): 3.93 million yen (yen) Source: Nihon Keizai Shimbun 17,391.4 yen (as of 26 th October, 216) (3) Interest Rate (JGB 1-year yield) (4) Yen-Dollar Exchange Rate (%) % (as of 25 th October 216) Source: Ministry of Finance (yen) Source: Mitsubishi UFJ Research and Consulting 1 dollar = yen (as of 26 th October, 216)

6 I Basic Information of Japan 3. Aging Population in the World 4. Papua New Guinea Total fertility rate (births per woman) (Year 214) Philippines Mongolia Indonesia Uzbekistan Bangladesh Myanmar Malaysia India Sri Lanka Vietnam China Thailand Singapore USA New Zealand Australia Russia South Korea France Aging Population and Declining Birthrate UK Germany Japan 1. Taiwan.% 5.% 1.% 15.% 2.% 25.% 3.% Proportion of population aged 65 and over (% of total population) (Year 215) Source: World Bank, National Institute of Population and Social Security Research 6

7 I Basic Information of Japan 7 4. Overview of Social Security System <Social Security> Public Pension Old Age Benefit Survivor Benefit Complement Insurance Products provided by Japanese Life insurance Companies Fixed Annuity Variable Annuity Whole Life Insurance Term Insurance Endowment Insurance Public Health Insurance Medical Insurance Cancer Insurance Public Long-term care Insurance Long-term care Insurance

8 I Basic Information of Japan 8 (a) Public Pension Old Age Benefit Survivor Benefit Widow s Age If a survivor has a child Employees Pension Insurance Basic Pension 65 6 Survivors Employees Pension + Survivors Basic Pension OR Widow s Pension (Self-employed) (Employee) ( Employee ) ( Self-employed ) Cost National Government Subsidies Premium self-employed 16,26/M employee % of salary Public Pension can use fund ( 135 trillion) to ensure paying benefit sustainably. Benefit Starting age 65 years old Some older people can receive it from 6 years old. Amount self-employed 78,1/Y employee income-related amount/y Amount is adjusted not only for price fluctuation but also for a decrease in population. Eligibility to receive pension benefit premium payment for 25 years(to be1 years after Oct 217) Cost Paid as Public Pension (Old Age Benefit) Benefit Survivors Employees Pension Eligibility Employee Amount 3/4 of Old Age Benefit(Pension) Widow s Pension Eligibility Self-employed Age of widow in age 6-65 Amount 3/4 of Old Age Benefit(Pension) Survivors Basic Pension Eligibility Employee and Self-employed Survivors have children Amount 78,1/Y + 224,5/Y per child Lump-sum payment Eligibility Not falling under abovementioned categories Amount 12,~32, proportional to the payment period

9 I Basic Information of Japan 9 (b) Public Health Insurance (c) Public Long-term Care Insurance Age 75 Elderly Medical Care System Age 65 Public long-term care insurance Retirement age Society-managed Health Insurance National Health Insurance 4 Insured person who needs care due to age-related diseases Others ( Employee ) (Self-employed) Cost Cost National and Local Government Subsidies Premium Society-managed Health Insurance fixed % of salary National Health Insurance/Elderly Medical Care System premium determined by local government Benefit Benefit in Kind 7% of Medical Service Cost 7% may increase to 8%or 9% when insured person is under 6 years old or over 7 years old. Out of pocket expense is limited depending on age and income of insured person. Medical Service doesn t include some highly-advanced medical technology. Benefit in Cash Child birth allowance National and Local Government Subsidies Premium Insured persons who are 4-65 years old premium fixed depending on Public Health Insurance Insured persons who are 65- years old premium determined by local government Benefit Benefit in Kind 9% of Long-term Care Service Cost Insured persons who are 4-65 years old can receive benefit only when they need long-term care due to age-related diseases. Out of pocket expense is limited depending on age and income of insured person. Long-term Care Service Cost is fixed depending on care-needs of insured person.

10 II Japan s Position in the World Life Insurance Market

11 II Japan s Position in the World Life Insurance Market 11 Japan s Position in the World Life Insurance Market <Life Insurance Premium Volume by country in 215> <New Premium Written by company in 214> Ranking Country Share in World Market Ran king Company name Ran king Company name 1 United States 19.9% 1 UnitedHealth Group Inc. 11 People s Ins (Group) Co of China Ltd. 2 Japan 13.57% 2 AXA S.A. 12 Prudential plc 3 United Kingdom 8.47% 4 PR China 8.32% 5 France 5.93% 6 Italy 4.93% 3 Allianz SE 13 4 Assicurazioni Generali S.p.A Anthem, Inc China Life Insurance (Group) Co. 16 Japan Post Insurance Co., Ltd. Ping An Ins (Group) Co of China Ltd. Zurich Insurance Group Ltd. National Mut Ins Fed Agricultural Coop. 7 South Korea 3.88% 7 State Farm Group 17 Humana Inc. 8 Germany 3.82% 8 Kaiser Foundation Group of Health Plans 18 Dai-ichi Life Insurance Company, Limited 9 Taiwan 3.14% 9 Munich Reinsurance Company 19 Nippon Life Insurance Company 1 India 2.24% 1 Aetna Inc. 2 Berkshire Hathaway Inc.

12 III Overview of Life Insurance Business in Japan

13 III Overview of Life Insurance Business in Japan (1) Changes in Life Insurance Ownership Rate per Households (including Annuity) (%) Source: Japan Institute of Life Insurance: Consumer Survey Note: The data includes the total of private life insurance (including Japan Post Insurance), postal insurance and JA cooperative 13

14 III Overview of Life Insurance Business in Japan (2) Number of Life Insurance Policies Owned by Household (Number) Source: Japan Institute of Life Insurance: Consumer Survey 14

15 III Overview of Life Insurance Business in Japan (3) Average Amount of Coverage per Household (yen million) Source: Japan Institute of Life Insurance: Consumer Survey

16 III Overview of Life Insurance Business in Japan (4) Annual Premium Payment per Household 12.% Proportion of annual premium to total annual income (thousand yen) 8 1.% 8.% 6.% 4.% 1.1% 1.% 9.4% 9.6% 9.2% 9.2% 8.4% 8.9% % 7.4% % % % %.% Annual premium Source: Japan Institute of Life Insurance: Consumer Survey, Cabinet Office of Japan 1 16

17 III Overview of Life Insurance Business in Japan (5) Purpose of Life Insurance Ownership.% 1.% 2.% 3.% 4.% 5.% 6.% 7.% Medical or surgery expense % 56.3% Survivor % 6.5% Funeral expense 3 13.% 12.5% Educational and marriage expenses of children 4 7.9% 1.9% Accident 5 7.7% 19.4% Post-retirement life 6 7.7% 8.9% Saving 7 6.1% 7.1% Long-term care expense 8 2.9% 4.4% <Multiple choice question> Source: Japan Institute of Life Insurance: consumer survey 17

18 III Overview of Life Insurance Business in Japan (6) Share of Distribution Channel Tied Sales Agents House visit Workplace Direct Sale Internet TV, Newspaper, Magazine Office of Insurer Bank/Securities Firm Bank Securities Firm Sales Agency At the Counter Sales Representative Via Workplace or Labor Unions Others Source: FY 216 Survey on Life Protection, Japan Institute of Life Insurance 18

19 III Overview of Life Insurance Business in Japan (7) Life Insurance Companies in Japan Total : 41 (as of October, 216) Premium Income of Japanese Life Insurers in FY215 Domestic: 25 Nippon Japan Post Non-Life subsidiaries: 4 Dai-ichi Meiji Yasuda Sumitomo Foreign* : 16 Branch offices: 3 Prudential MS&AD T&D Aflac *Foreign stake of 5% or more Metlife Sony (Note) -Nippon: Nippon + Mitsui; -Dai-ichi: Dai-ichi + Dai-ichi Frontier + Neo First; -Sumitomo: Sumitomo + Medicare; -Prudential: Gibraltar + Prudential + PGF; -MS&AD: Mitsui Sumitomo Aioi + Primary; -T&D: Taiyo + Daido + T&D; -Sony: Sony + Aegon Sony; -Fukoku: Fukoku + Fukokushinrai; -AXA: AXA Life + AXA Direct Tokio Marine Fukoku Manulife Axa (yen billion) 19 Source: The Life Insurance Association of Japan

20 III History of Life Insurance Industry in Japan (8) Number of Life Insurance Sales-Person (Thousand) 1,2 1, 8 tied sales agents sales representatives at agencies (including Banks) ,51, , Source: The Life Insurance Association of Japan 2

21 III Overview of Life Insurance Business in Japan (9) Number of Individual Insurance Contracts New policies Policies in Force (Number; million) 2 2 (Number; million) Individual Life Insurance Individual Annuities Individual Life Insurance Individual Annuities Source: The Life Insurance Association of Japan 21

22 III Overview of Life Insurance Business in Japan (1) Individual Insurance Share by Type New Policies (FY215) Policies in Force (FY215) Variable Annuity, 1.31 Juvenile, 4.85 Fixed Annuity, 7.44 Others, 6.27 Whole Life, Variable Annuity, 1.34 Fixed Annuity, 1.14 Juvenile, 3.95 Others, 4.57 Whole Life, Cancer, Term Life, Cancer, Medical, 2.86 Endowment, 8.98 Medical, Term Life, Endowment, 7.82 Source: The Life Insurance Association of Japan 22

23 III Overview of Life Insurance Business in Japan (11) Premium Income (yen billion) Individual Life Insurance Individual Annuities Group Life Insurance Group Annuities Others 36,289 37,14 37,222 37,748 34,454 34,738 1,724 2,227 3,874 3,836 2,74 4,563 4,276 4,176 3,684 3,926 1,125 3,852 1,119 1,19 3,813 1,114 1,113 4,73 5,154 1,116 4,374 4,679 4,312 4, ,448 22,734 24,99 22,721 24,546 25, Source: The Life Insurance Association of Japan 23

24 III Overview of Life Insurance Business in Japan (12) Insurance Payment (yen billion) 4, Claims Paid Annuities Paid Benefits Surrender Benefits Paid Other 35, 3, 32,49 2,155 31,29 31,686 2,445 3,225 33,681 2,918 34,953 3,947 32,454 3,913 25, 5,799 5,68 5,867 8, 8,772 7,46 2, 15, 3,976 2,876 3,85 3,937 4,54 3,135 3,36 4,5 4,66 5,197 4,97 4,86 1, 5, 17,244 16,143 15,296 14,38 12,971 12, Source: The Life Insurance Association of Japan 24

25 III Overview of Life Insurance Business in Japan (13) Profit (yen billion) 45 Basic Profit Ordinary Profit ,236 2,261 1,71.7 2,893 2,67 2,463 2,556 2,153 2,193 1,82.9 1, ,731 1, ,62.4 1, ,422 2,53 2,144 2,19 1,48.3 1,419 3,38 3,63 3,16.8 2,87 2,69 2, , , Basic profit represents the profitability of the life insurance business. (1,1.) *excluding Japan Post Insurance *Basic Profit = Ordinary Profit - Capital Gain/Loss - Nonrecurring income/loss Source: The Life Insurance Association of Japan 25

26 IV Brief History of Life Insurance Industry in Japan

27 IV Brief History of Life Insurance Industry in Japan Total Premium Income and GDP (billion yen) 4, 35, 3, Proportion of total premium income to GDP 6.8% 6.13% 5.28% 5.62% 7.14% 7.56% 8.% 7.% 6.% 25, 4.69% 5.% 2, 15, 1, 5, 3.34% 2.61% 2.39% 27, % 1.6% 15,48 37,748 34,454 3,762 26,941 28,333 Premium Income ,8 3,981 8, % 3.% 2.% 1.%.% Average Number of Members of Ordinary Households

28 IV Brief History of Life Insurance Industry in Japan Total Assets and Portfolio Yields Changes in Total Assets 4, 367,168 35, 32,691 3, 25, 29, , ,731 2, 15, 131,619 1, 53,871 5, 5,855 12,893 26, (%) Tangible Fixed Assets, 1.7 Financial Loans, 8.71 Total Assets: 367 Trillion Yen (As of the end of.fy215) Others, 8.52 Cash/Deposits 2.38 Portfolio Yields by Type of Assets FY Bonds Domestic Stocks Foreign Securities Financial Loans Real Estate Genera l Account Assets Policy Loans,.82 Foreign Securities, JGB, Stocks, 5.4 Corporate Bonds, 6.91 Source: The Life Insurance Association of Japan 28

29 IV Brief History of Life Insurance Industry in Japan Changes in Product Portfolio (the number of new policies) Endowment Term Whole Life Medical Annuties Others 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Source: The Life Insurance Association of Japan 29

30 IV Brief History of Life Insurance Industry in Japan Changes in Asset Management Portfolio 1% 9% 8% 7% 6% 5% Cash/Deposits & Call Loans Government Bonds Corporate Bonds Stocks Foreign Securities Policy Loans Financial Loans Tangible Fixed Assets Others % % 2% 1% % Source: The Life Insurance Association of Japan

31 V Addressing the issues

32 V Addressing the issues 1. Financial crisis in the 199s Changes in economic situation The Japanese economy maintained favorable growth until 1989 mainly due to the expanding domestic consumption. However, stock prices and land prices plunged after peaking in Maintain low interest rate policy for a long time for monetary relaxation Impacts on the life insurance industry The amount of both new business and business in force declined affected by the economic downturn Lower investment yields caused large negative spread Financial condition deteriorated due to falling stock prices The ratio of stocks in insurers portfolios was 22% in 199 (Y billion) Negative spread* , (Y) Stock Price (Note) Total of major 4 companies (Nippon, Dai-ichi, Meiji Yasuda, Sumitomo) *Loss due to portfolio yield rate fallimg below the expected interest rate Interest rate (1yr JGB) (%) Source: Bank of Japan, Financial Service Agency

33 V Addressing the issues Bankruptcy cases of life insurers Nissan Life Toho Life Daihyaku Life Taisho Life Chiyoda Life Kyoei Life Tokyo Life Yamato Life Procedure Administrative Administrative Administrative Administrative Judicial Judicial Judicial Judicial Excess liabilities (a)-(b) Approx (April 1997) Approx.65 (June 1999) Approx (May 2) Approx (August 2) Approx. 595 (October 13, 2) Approx (October 23, 2) Approx (March 31, 21) Approx (October 17, 28) Asset (a) (billion yen) Liability(b) (billion yen) 1, ,19 1, ,233 3, , ,84 1, ,828 4, Relief Insurance Company Aoba Life (Prudential Life) GE Edison Life (Gibraltar Life) Manulife Life Azami Life (PGF Life) AIG Star Life (Gibraltar Life) Gibraltar Life T&D Financial Life Prudential Financial Japan Life (PGF Life) Aid amount by LIPPCJ (billion yen) Changes in Policy Reduction of policy reserve No reduction 1% 1% 1% 1% 8% No reduction 1% (additional reduction for high-interest policy) Post-reduction expected interest rate 2.75% 1.5% 1.% 1.% 1.5% 1.75% 2.6% 1.% Date of Resolution October 1, 1997 Transfer of contract March 1, 2 Transfer of contract April 2, 21 Transfer of contract March 31, 21 Transfer of contract April 2, 21 Conversion to a stock company (Restart business) April 3, 21 Restart business October 19, 21 Conversion to a stock company (Restart business) June 1, 29 Restart business 33

34 V Addressing the issues Efforts of Industry a) Accumulating Internal Reserves Absorbed impacts of the Financial Crisis Yen Trillion Internal Reserves (Total of major 4 companies) *Internal Reserves: Total Capital + Capital Reserves + Price Fluctuation Reserves + Accumulated Fund for Price Fluctuation + Risk Reserves + Contingency Reserves Internal reserves was accumulated from 3 trillion to 7 trillion. (Note) Revision in Distribution Regulation: In accordance with the partial amendments to Ordinance for Enforcement of Insurance Business Act in 22, the bottom limit of the distribution rate of surplus to policy dividends was brought down from 8% to 2% in order to secure adequate internal reserves in 22. b) Stock Holding Source: disclosure of each company Trends in Amount and Ratio of Bonds and Stocks Total assets and stock holding trillion Total assets Stocks 28.9(21.9%) 24.7 (13.4%) 19.8 (5.4%) Cutting down (Excluding JP Insurance) Source: The Life Insurance Association of Japan (trillion yen) Bonds Ratio of Bonds to total Assets Stocks Ration of Stocks to total Assets (%) 6.% 5.% 4.% 3.% 2.% 1.%.% 34

35 V Addressing the issues c) Duration of Bonds (%) Breakdown of JGB by time of maturity Below 1yr to maturity 88.3% 28.9% Over 1yr to maturity 11.7% 71.1% Based upon disclosure of each company d) Standard interest rate of new sales product : 5.5% : 2.75% : 1.5% 216-:.25% (expected) 213-: 1.% JGB Issuance by duration (Availability of super long-term bonds) 2,, 1,5, 1,, 5, e) Reduction of operating expense ratio to total premium income (%) ( 1million) auction for enhancedliquidity 1y or less 1y - 1y 1y more than 1y Standard Interest Rate Portfolio Yield of General Account Assets f) Accumulation of additional policy reserves In order to ensure further financial soundness and dissolve negative spread, some insurers started to accumulate additional policy reserves Source: FSA, LIAJ g) Changes in sales products Shifted from saving type products (such as whole life insurance & endowment ) to protection type products (such as medical insurance). Started sales of adjustable interest funding life insurance 35

36 V Addressing the issues 2. Aging Population (1) Population Demographics Aged 19 or under Aged 2-64 Aged Aged 75 or over Population aging rate (aged 65~ to the total population) (ten thousands) 14, 12, 1, 8, 6, 4, 2, Total Population (Underlined number) Actual Projected 11,76 12,15 12,361 12,557 12,693 12,777 12,86 12,66 12,41 12, , , ,16 1, ,646 11, ,19 1, ,31 9,921 1, , ,47 2,179 1,221 9, , ,278 9,78 9, , ,245 9,193 8, ,733 2,223 8,674 1, ,257 1, , ,495 2,41 1,645 2,336 6,786 7,56 7,353 7, ,6 4,15 4,646 5,19 5,65 6,295 7,861 7, ,383 7,752 7,497 1,225 7,89 1, , ,559 6, , ,393 4,978 4,643 4,368 4, ,846 3,883 3,781 3,648 3,432 3,517 3,578 3,51 3,249 2,857 2,596 2,49 2,287 2,176 2,15 1,849 1,698 1,562 1,467 1,386 1,297 1,199 1, (%) Source : For the figures until 21, Population Census, The Ministry of Internal Affairs and Communications For the figures from 215, The result of the medium variant projection under Population Projection for Japan (as of January 212), National Institute of Population and Social Security Research (Note) The total population from 195 to 21 includes the population of uncertain age. (2) Population Pyramid Aged 65 M F M F M F Aged 15 Source : For the figure of 198, Population Census, The Ministry of Internal Affairs and Communications For the figure of 21 and 24, The result of the medium variant projection under Population Projection for Japan (as of January 212), National Institute of Population and Social Security Research 36

37 V Addressing the issues (3) Fertility rate and Number of births ,19,55 1,71, ,187,6 1,62,53 1,3, Number of births Fertility rate Completetd Fertility rate *Completed Fertility rate: Average number of births for a couple married for 15 to 2 years, which is considered as ultimate number of births for a married couple (4) Number of children for married couple (Duration of marriage: 15 to 2 years) 4 or more % 9% 8% 7% 6% 5% 4% 3% 2% 1% % 17.8% 19.4% 22.4% 23.8% 3.2% 56.2% 54.1% 57.% 56.% 55.4% 57.8% 56.4% 53.6% 53.2% 11.7% 15.9% 18.6% 11.% 8.9% Source: Cabinet Office, National Institute of Population and Social Security Research

38 V Addressing the issues (5) Average Life Expectancy Male Female Estimated Source: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications 38

39 V Addressing the issues (6) Medical Expenses (a) Hospitalization Rate by Age Group (%) (Days) (Age) (Age) (c) Lifetime Medical Expenses (Estimates in Fiscal 29) (b) Average Days of Hospitalization by Age Group Source: Patient Survey (211), Ministry of Health, Labour and Welfare (ten thousand yen) (Age) 14 Lifetime Medical Expenses Y23. million Under 7 5% or over 5% 17 4 Source: Ministry of Health, Labour and Welfare 9

40 V Addressing the issues (7) Long-Term Care Expenses (a) Period of Unhealthy Condition = Average Life Expectancy at Birth Healthy Life Expectancy Male Female (Years) Year Average period of a life WITHOUT physical limitations Average period of a life WITH physical limitations Average life expectancy Average period of a life WITHOUT physical limitations Average period of a life WITH physical limitations Average life expectancy (b) Certification Rate of Needed Long-Term Care in 211 By Age Group (ten thousand) Source: Ministry of Health, Labour and Welfare Population Number of People Certified Certification Rate (Age) 4 Source: Survey of Long-Term Care Benefit Expenditures, Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications (%)

41 V Addressing the issues (8) Employment and Asset Holdings of the Elderly (a) Labour Force Participation Rate of the Elderly Proportion of elderly employees to population by age group (%) (Male) 65-69(Male) 6-64(Female) 65-69(Female) Note that about 4% of unemployed elderly men are willing to work. Source: Labour Force Survey, Ministry of Internal Affairs and Communications 41

42 V Addressing the issues (b) Assets of the Elderly Amounts of Savings and Yearly income per Household by Age Group of Household Head (million yen) 3 The Elderly 25 Savings(million yen) Yearly income(million yen) (Age) ~29 3~39 4~49 5~59 6~69 7~ Source: Family Income and Expenditure Survey (213), Ministry of Internal Affairs and Communications 42

43 V Addressing the issues (9) Proposal of establishment of the Longevity Pension Relationship between the Longevity Pension and existing system Formation of assets for wealthier life or revenue between retirement and pensionable age Business Income, Employment Income etc Terminable annuity Other asset formation products + Longevity Pension + Ensuring lifelong fixed income in combination with public pension Promoting spread through political support such as subsidies Public Pension (retirement) (pensionable age) (death) Related topics for discussion Extension of mandatory retirement age -Raising of the medical and long-term care copayment -Raising the benefit age of public pension 43

44 VI The Life Insurance Association of Japan

45 VI The Life Insurance Association of Japan 45 <Overview of LIAJ> Name The Life Insurance Association of Japan (LIAJ) Foundation The LIAJ was incorporated on 7 December 198 Member Company Board Member Number of offices Purpose Main Activities 41 Companies (as of October 216) The LIAJ consists of all life insurance companies which are licensed under the Insurance Business Law. (Enrollment is not obligated by the law.) Representatives of life insurance companies and the association s full-time executives 53 offices The main office in Tokyo and 52 branch offices in all the prefectures. To promote the sound development of the life insurance industry in Japan, to maintain its liability, and thereby to contribute to improving quality of national life. Representing the opinions of life insurance industry Conducting research and taking statistics Development of voluntary guidelines Education Public relations Social contribution Consultation and Alternative Dispute Resolution Operating Life Insurance Network Center

46 VI The Life Insurance Association of Japan 46 <History> Year Item 1898 The Forum of Japanese Life Insurers was founded. 195 The Forum of Japanese Life Insurers was reorganized into the Association of Japanese Life Insurers. 198 The Association of Japanese Life Insurers was authorized as an incorporated association The Life Insurance Control Association was founded. The Association of Japanese Life Insurers was renamed the Life Insurance Network, and most of its operations were transferred to the Life Insurance Control Association The Life Insurance Council of Japan was founded to take over the operations of the Control Association after it was dissolved. The Life Insurance Network was renamed the Life Insurance Association of Japan (LIAJ). All the operations of the Life Insurance Network were transferred to the LIAJ. 28 The LIAJ marked the 1th anniversary since its foundation. 214 The LIAJ made a transition from an incorporated association to a general incorporated association.

47 VI The Life Insurance Association of Japan 47 Organization Chart: General Meeting Auditors Board of Directors Committees Local Committees Association Secretariat General Affairs Dept. Public Relations Dept. Administration & Education Dept. Planning Dept. Life Insurance Consultation Center Arbitration Advisory Committee Arbitration Council Research Dept. Joint System Office Life Insurance Consultation Office International Dept. Local Offices (53 Districts)

48 VI The Life Insurance Association of Japan <Organization of Association> There are seven committees under the Board of Directors because the wide range of technical issues including solicitation and conclusion of insurance contract, maintenance and insurance payment, asset management and accounting are required to be discussed. Each committee is looking into its technical issues. The committees consist of representative from all member companies since the committees deal with the issues related to the entire industry. Current Issue Committee Agency Management & Educational Committee Financial Management Committee Group Pension and Insurance Committee Information Systems Committee Working Committee on Planning Working Committee on Agency Management Working Committee on Financial Management Working Committee on Group Pension Insurance Working Committee on Information Systems Working Committee on Legal Affairs Working Committee on Education Working Committee on Group Insurance Working Committee on General Affairs Working Committee on PR Operation Management Committee Working Committee on insurance for supporter of M&PHD Accounting Committee Working Committee on Accounting Working Committee on Underwriting Working Committee on Contract Maintenance Working Committee on Insurance Payout Actuarial Working Committee Working Committee on Medical Affairs 48

49 VI The Life Insurance Association of Japan <Life Insurance Consultation Center> The LIAJ was designated by the FSA as a designated dispute resolution body based on the Insurance Business Act, and therefore handles complaints and resolves disputes related to life insurance business and foreign life insurance business. In order to conduct those activities, the Life Insurance Consultation Center was established within the LIAJ. The Center and its offices provide consultation and receive inquiries or complaints from policyholders or consumers. *Financial ADR system: Alternative conflict resolution procedures in financial sectors. The competent authority shall appoint the dispute resolution organization based on the law (came into force in October 21) Appropriate Handling of Inquiries and Complaints In the Life Insurance Consultation Center, expert consultants deal with inquiries and complaints from a neutral position. When the Center receives a request to resolve a complaint, it strives to reach an early settlement such as by making requests for a settlement and by mediating settlements with the life insurers involved. <Number of inquiries and complaints> (FY) 25, 2, 15, 1, 5, 6,898 8,98 1,148 7,616 6,458 7,76 6,623 5,697 5,463 5,186 4,724 14,256 11,11 9,989 1,1 8,156 9,593 7,844 7,437 6,83 6,67 6, General Inquiries Compaints 49

50 VI The Life Insurance Association of Japan 5 <Operation of Arbitration Council> When a customer files a complaint with the Center, the Center arranges the negotiation between the life insurer involved and the customer to reach a settlement. In principle, if they cannot reach a settlement within one month, the Center convenes the Arbitration Council to resolve the dispute. The Arbitration Council consists of 15 members (6 lawyers, 6 consumer advisors and 3 staffs of the Life Insurance Consultation Center) and strives to achieve an appropriate resolution of the dispute. Filing of Complaint Receive complaint Dispute unresolved Arrange negotiation Settlement reached Settlement reached Judging of appropriateness Fact-finding through documents, hearings, etc. Deliberation Preparation/ presentation of settlement proposal Arbitration unsuccessful Refusal Arbitration Council Arbitration completed by ruling <Number of Filings for Procedures of the Arbitration Council> FY Number