Equitable Creates a Stir in Japan

Equitable Life Assurance Society’s application to do business in Japan has triggered the sale of variable life insurance policies by 13 imitators here, with six more scheduled to start by next spring. But the American firm is confident that it can cope.

Donald P. Kanak, an Equitable vice president, says his firm is looking forward to amassing $1 billion worth of assets and more than $500 million in premium income in Japan in 10 years by selling only variable life insurance.

Equitable hopes to be employing nearly 1,000 salespeople in Japan by 1996, he added at a news conference held by company executives.

Although late in arriving--more than 40 foreign insurance firms already are operating here--Equitable has stirred a sensation created by few of its predecessors because it asked for, and received, permission to introduce variable life insurance as its only product here. The product, which had never been sold here until Oct. 1, offers investors cash-in payments and death benefits that vary depending on returns from investments made on behalf of the policyholder.

Nearly half of all premiums paid on life insurance policies in the United States now go to variable life insurance, which Equitable introduced there in 1976.

With the average Japanese family carrying more than $100,000 in life insurance protection, “Japan is the best life insurance market in the world,” John B. Carter, president of Equitable of the United States, said.

“But Japan also has the best life insurance companies in the world. So there is no need to come into Japan with similar products that are already successfully sold here in the greatest quantities in the world. Variable life insurance depends on its sales in terms of its interest-rate performance, and we have a 10-year track record at 14% in the United States.

“We think that record, if we can duplicate it, will be attractive in Japan,” Carter said.

Offering Investors a Choice

Equitable also will retain one distinction for its policies here. It is the only company offering investors a choice, or mix, of three separate funds--in Japanese stocks, in American stocks and in the money market.

The company, which began sales from three offices in Tokyo and one in Yokohama on Oct. 15 with a force of 200 agents, hopes to sell 12,000 policies and earn revenue of 2 billion yen ($12.5 million) in its first year, Donald J. Mooney, president of the firm’s subsidiary here, said. In its first 16 business days, it sold 1,000 policies with an average monthly premium of 210,000 yen ($1,312.50)--”more than 20% better than we had expected,” he added.

Mooney said Equitable conducted extensive market research, interviewing 3,000 heads of households, and concluded that Japanese investors, who traditionally have saved most of their money in ordinary bank deposits and postal savings accounts, are growing more sophisticated and more concerned about the return on their investments.

The Finance Ministry gave its approval to Equitable, as well as to sales of variable life insurance, as part of a sweeping liberalization of Japan’s financial markets, which is breaking down traditional barriers between banking, securities and insurance firms, 13 months after the U.S. firm submitted its application, Carter said.

“To some people, that sounds like a long time, but in the United States, it took us 7 1/2 years to get national approval of the variable life insurance product. We think that is a great kudo for the ministry here,” he declared.