U.S., Japan Seal Insurance Pact
The United States and Japan reached agreement Sunday on a series of new steps designed to open Japan’s $341-billion insurance market to more American and other foreign insurance firms by speeding up the deregulation of the Japanese insurance industry.
The accord, negotiated over the weekend by Acting U.S. Trade Representative Charlene Barshefsky and Japanese Finance Minister Hiroshi Mitsuzuka, is aimed at reducing barriers that have prevented U.S. firms from selling auto, fire and casualty insurance in Japan.
It also is expected to enable U.S. and other foreign companies eventually to enter the Japanese market for specialty insurance policies such as long- and short-term disability insurance and travel insurance. But those measures will not be completed until 2000.
Sunday’s agreement, which climaxed 14 months of painstaking, sometimes rancorous negotiations, was designed to jolt Japan into complying more fully with a 1994 accord between the two countries that U.S. officials had complained was not being carried out by Japan.
American negotiators had charged that despite the earlier accord, Japan had moved only slightly toward deregulation. Foreign firms still hold only a 3.6% share of the total Japanese market, and Japanese firms had been poised to crowd them out of the specialty market as well.
As described by U.S. and Japanese officials, the accord includes these major elements:
* After delaying for the better part of two years, Japan will begin reducing the power of the five-company cartel that currently sets rates for various kinds of insurance policies in Japan.
Between now and 1998, decisions on how rates are structured will be made by the Japanese Finance Ministry, and in early 1998, the government will introduce legislation and regulations to eliminate the cartel’s power altogether.
* In September, Japan, for the first time in 50 years, will allow insurance companies to vary their rates for auto insurance depending on such factors as a driver’s gender and accident record.
* Between now and the end of the year, Japan will deregulate most of its market for commercial fire insurance to allow more U.S. and other foreign firms to enter. The item constitutes about half of the major segment of the insurance market in Japan.
* Japan will streamline the procedures for introducing new kinds of insurance policies. Under current law, companies have to apply separately for each new product they want to offer--a process that often takes years before a firm can obtain the needed government approval.
* The Japanese government will limit the expansion of Japanese insurance companies into specialty markets such as cancer insurance--which U.S. firms want to tap--until 2 1/2 years after the bulk of the deregulation has been completed, to give American firms a foothold.
