The Effect of Demographic Change on Life Insurance Trends in Japan

Abstract

Birthrates in Japan have been declining and the aging rate has been increasing. Since the 1990s, the rate of insurance purchases has declined. My thesis examines the relationship between birthrate, aging, and life insurance preferences. I propose that there is a causative relationship between increasing aging rates, decreasing birthrate and decreasing premium payment, and decreasing coverage amount. As birthrate declines there are fewer beneficiary children, thus less need for life insurance and fewer purchases of those products. Using data analysis, I determined that there is a relationship between marriage rates and life insurance purchases, contrasting the original theory that birthrates are the main impacting variable. As birthrate decreases, the number of children who take care of the elderly is less, thus the elderly are more reliant on their spouses, and life insurance is purchased as a protection for spouses more than for children. Marriage rate has a greater impact on life insurance purchase than birthrate. As marriage rate decreases, premium payments and coverage amount decrease. These demographic trends are not unique to Japan; the United States will soon see the same impacts. Future study is needed to determine other influencing factors and the degree of change as life insurance products change to include disability and retirement coverages.