FOCUS: Single-Premium Whole Life Insurance Gains Popularity in Japan

Tokyo, July 22 (Jiji Press)–Four major Japanese life insurers, including Nippon Life Insurance Co., reported higher revenues in fiscal 2025, driven mainly by stronger sales of yen-denominated single-premium whole life insurance policies. The products have become increasingly attractive to consumers after insurers raised their prospective yields in response to higher long-term interest rates following the Bank of Japan’s interest rate hikes. Yield Hikes Under single-premium whole life insurance policies, policyholders pay the entire premium in a lump sum when signing the contract. Upon the policyholder’s death, the bereaved family or other designated beneficiaries receive insurance benefits. In many cases, policyholders use large sums of money, such as retirement allowances, to pay the premium. The products are often used for inheritance planning and asset formation, as they offer larger tax exemptions than bank deposits do. Many also provide surrender values exceeding the principal if the policy is canceled after a certain period following the conclusion of the contract. Insurance companies invest the premiums they receive in assets such as government bonds. Higher interest rates improve investment returns, enabling insurers to raise the yields guaranteed to new policyholders. Such increases, in turn, allow insurers to offer higher death benefits. Premium income from yen-denominated single-premium whole life insurance at Nippon Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co. surged in fiscal 2025, which ended in March, to a combined total of about 2,379.7 billion yen, roughly 2.4 times the previous year’s level. At Daiichi Frontier Life Insurance Co., premium income from all yen-denominated products rose 23.9 pct in fiscal 2025 from the previous year. Its single-premium whole life product, Premier Present 5, has performed strongly. The product’s guaranteed yield is reviewed twice a month in line with market interest rates. For example, if a 70-year-old man paid 10 million yen in premiums when signing a Premier Present 5 contract in the first half of June this year, the death benefit after a certain period would rise to about 15.29 million yen. By contrast, a similar product sold in the first half of August 2022 was designed to pay a minimum death benefit of about 10.61 million yen. Nao Suzuki, head of the product planning group in Daiichi Frontier’s product business division, expressed confidence that customer demand will continue to grow. “When interest rates were low, sales centered on foreign currency-denominated insurance policies, but the appeal of yen-denominated products has also increased considerably,” he said. Unlike foreign currency-denominated products, yen-based policies carry no risk of losses stemming from exchange rate fluctuations, allowing policyholders to benefit fully from favorable contract terms. Possible Plateau It remains unclear, however, whether sales growth will continue at its current pace. At a news conference on Nippon Life’s latest earnings report, a company representative said, “Sales have recently started to run their course,” indicating that the company does not expect the elevated levels seen in fiscal 2025 to continue. Moreover, higher sales do not necessarily translate into an immediate increase in profits. Life insurers are required to add to policy reserves when insurance contracts are concluded in order to prepare for future payouts. As a result, stronger sales can weigh on core profit, a key measure of earnings from their mainstay business. Rising interest rates provide a tailwind for the life insurance industry. The long-term fortunes of insurers, however, will likely be determined by whether they can capitalize on these benefits and turn them into sustained growth. END [Copyright The Jiji Press, Ltd.]