Weekly tabloid Shukan Post reports that the average Japanese household pays 454,300 yen (approx. $5,300) a year in life insurance premiums. Despite being only 2% of the world’s population, Japan actually contributes 18% of the total insurance premiums of the world. Meaning, the average insurance spending in the country is $3,500 per capita, making it the highest in the world.
Insurance consultant and author of Seimei Hoken Wana (Life Insurance Trap), Toru Ushiroda, believe that this phenomenon is occurring “because insurance companies can easily coax (trusting Japanese) consumers into signing life insurance contracts.”
Ushiroda said that “A surprisingly large number of subscribers don’t know the content of the agreements they have signed. People have told me they joined a particular scheme because they ‘often saw it advertised on television so thought it to be a popular and reasonable plan.’ They continue to pay premiums with a sense that there is no choice, like taxes which are automatically deducted from one’s pay. Even if the insurance terms appear favorable, they cannot be that good for the subscriber.”
In order to ensure that the consumer gets the utmost benefit from the insurance he is buying, he needs to understand that the ‘net premium’ should be of a larger ratio than the ‘additional premium’. The ‘net premium’ goes into the pooled funds which all subscribers share, while the ‘additional premium’ is where the insurance companies get its profits and provisions for its expenses.