Measurement of Effects and Productivity of Deregulation in Insurance Industry in Japan

The Insurance Business Law was revised for the first time in a hundred years, prompting the generation of many insurance groups operating both life insurance and non-life insurance businesses as well as large-scale managerial integration in the non-life insurance industry, and the effects of that deregulation are now being recognized. However, improvement levels of productivity of insurance groups vary when evaluated using stochastic frontier production functions, thereby making it difficult to assert that the effects of deregulation have been fully achieved in the truest sense. Furthermore, while the sale of insurance policies through bank channels, another offspring of deregulation, has helped to increase the sales of personal pension products, mainly for groups centering on the non-life insurance business, it has not contributed to improving profit efficiency. The small-scale very similar group strategies adopted by insurance groups in Japan are now rather inadequate for the management strategies needed in a market in which growth is slowing down. They will be required to review their group strategies based on the model of the group strategies adopted by European insurance companies, which exceed the financial sector and national frameworks