The other day, in a post on this blog, I talked about the possibilities of various services for the ever-increasing number of foreign residents, but life insurance was not included.
There are various factors involved in the lack of life insurance services for foreign residents. The life insurance market in Japan is designed primarily for customers of Japanese nationality, and currently there are not enough services specifically tailored to foreign residents. This is due to legal and institutional challenges, cultural differences, difficulties in assessing risks, and a lack of attractiveness as a business. Below, we will analyze these reasons in detail and discuss future challenges and solutions.
1.Reasons why there are few life insurance services for foreign residents
(1) Legal and institutional challenges
Japan’s life insurance systems are primarily aimed at residents of Japan, and many are designed with long-term contracts in mind. Foreign residents vary in their status and length of stay, from short-term visitors to permanent residents, creating uncertainty when insurance companies assess risk.
In addition, legal regulations such as the Insurance Business Act require insurance companies to strictly verify the identity of their customers, but in the case of foreigners, it may be difficult to collect and confirm the information necessary for identity verification. In particular, additional procedures and confirmation work are required to confirm the validity of residence status and period of stay, which is an impediment to the provision of life insurance.
(2) Differences in language and culture
Life insurance contracts contain detailed terms and complex clauses that customers need to fully understand. However, if the documents and explanations provided by the insurance company are only in Japanese, it will be difficult for foreign residents to understand the contents. In particular, legal terms and specialized insurance terminology are difficult for foreigners whose native language is not Japanese to understand.
In addition, cultural differences also come into play. For example, awareness and attitudes towards life insurance vary greatly from country to country. In Japan, there is a culture of providing death insurance for families, but such a practice may be less common in other countries. These cultural differences make it difficult to accurately understand the insurance needs of foreigners and provide appropriate products.
(3) Difficulty in risk assessment
The risk assessment process in insurance operations is based on many factors, including the customer’s age, gender, health status, occupation, and lifestyle habits. However, for foreign nationals, these data may be insufficient or inaccurate. For example, if there is no record of your past medical history or medical examinations in Japan, it will be difficult for insurance companies to accurately assess your risk.
Furthermore, when foreigners have different lifestyles and occupations than Japanese people, it is necessary to conduct risk assessments accordingly, but current insurance products and risk assessment standards often do not meet these requirements. Therefore, when developing life insurance products for foreigners, the additional cost and effort required by insurance companies is a major challenge.
(4) Lack of attractiveness as a business
The life insurance market for foreign residents is still under development, and its size is small compared to the overall life insurance market in Japan. As a result, many insurance companies find it difficult to find this business attractive. In particular, for short-term residents, the contract period is short, making it difficult for insurance companies to form a long-term customer base.
Additionally, developing insurance products requires significant costs, and if the market size is small, there is a risk that the return on investment may not be worth it. As a result, there continues to be a lack of special insurance products for foreign residents.
2.Challenges for the future
(1) Review and simplification of the legal system
In order to expand life insurance services for foreign residents, it is first necessary to review the legal system. Specifically, there is a need to simplify the confirmation procedures regarding foreigners’ residence status and period of residence, and to improve the identity confirmation process. This allows insurance companies to serve foreign customers quickly and accurately.
It is also important to ease regulations on life insurance and enable flexible product design for foreign customers. For example, system reforms could be made to encourage the provision of short-term insurance products based on the length of stay or plans that include special risk coverage for foreign workers.
(2) Strengthening language support and cultural responsiveness
In order to eliminate language barriers, it is necessary to have multilingual insurance product descriptions and contracts. Insurance companies should create an environment where foreign customers can sign contracts with peace of mind by increasing their support in major foreign languages such as English, Chinese, and Korean.
Additionally, it is important to provide cross-cultural training to insurance salespeople so that they can provide services that reflect the unique needs and cultural backgrounds of foreign customers. This is expected to improve customer satisfaction and expand the life insurance market for foreigners.
(3) Improving accuracy of data collection and risk assessment of foreign customers
Insurers will be required to leverage digital technology to facilitate the collection and use of data on foreign customers. Specifically, AI and big data analysis can be used to efficiently collect data on foreign customers’ medical history and health status, improving the accuracy of risk assessments.
Additionally, by linking with international medical databases and making it possible to refer to the past medical history of foreign customers, we will be able to more accurately assess insurance risks. This will make it easier for insurance companies to offer appropriate insurance products to foreign customers.
(4) Strategy for product development and market expansion for foreigners
Insurance companies need to develop flexible and customizable life insurance products to meet the diverse needs of foreign customers. For example, you can appeal to foreign customers by offering short-term insurance plans depending on the length of your stay, or products with special provisions that cover specific risks (for example, protection when you return home).
It is also effective to promote alliances with foreign communities and related organizations as a strategy to expand the market. You can increase awareness of insurance products through events that attract foreigners, holding seminars at community centers, and providing information online.
(5) Collaboration with social security to meet the needs of foreign workers
Foreign workers often have insufficient understanding of Japan’s social security system, and often do not correctly recognize the necessity of life insurance. Therefore, insurance companies are required to conduct education and awareness activities about the differences and complementary roles between the social security system and life insurance.
It is also important to cooperate with the government and local governments to establish information and consultation desks for foreign workers. This will create an environment where foreign workers can live and work in Japan with peace of mind.
Conclusion
There are a wide variety of factors behind the lack of adequate provision of life insurance services for foreign residents, including legal and institutional issues, cultural and language differences, difficulty in risk assessment, and lack of attractiveness as a business. There is. However, with the increase in foreign workers and international students, the market is expected to expand in the future.
Future challenges include reviewing the legal system, strengthening language support, improving the accuracy of risk assessment, making product development more flexible, and linking with the social security system. By addressing these issues, we will be able to expand the life insurance market for foreign residents and provide services that meet diverse customer needs.