Management Message
Message from the Group COO
Our Purpose is to create a society in which every person can live a healthy, prosperous, and happy life in their own way.
To this purpose, we strive to meet the changing needs of customers and earn their trust while strengthening our core and our resilience.
Mikio Okumura
Group COO, Director,
President and Representative Executive Officer
The origin of the Sompo Group is in Tokyo Fire Insurance Company, Inc., Japan’s first fire insurance company, founded in 1888. When fires occurred, Tokyo Fire Insurance Company representatives not only provided financial compensation in the form of insurance, but also rushed in before anyone else and risked their own lives to protect customers from the fire.
Over 135 years, we have inherited this DNA and it is now part of SOMPO’s Purpose.
We deliver “Security, Health & Wellbeing” to our customers to create a society in which every person can live a healthy, prosperous, and happy life. To this end, we protect people from future risks facing society, create a future society for healthy and happy lives, and foster the ability to change future society through diverse talents and connections. We will continue to deliver these three values.
To achieve this, I believe it is essential to first gain an accurate grasp of the changes in society and Sompo Group’s business environment, and to then take a hard look at our own business model and values and take what we learn to heart. As the Group Chief Operating Officer (COO), I am relentless in developing our future-oriented mindset and implementing what we have to do to meet the changing needs of customers and earn their trust while strengthening our core and our resilience.
Squarely facing a tough environment
Since taking office as Group COO last April, I continue to question myself to ensure I correctly and calmly recognize the business environment in which the Group finds itself and how to squarely face harsh reality to realize SOMPO’s Purpose and achieve sustainable growth.
First of all, I believe we must accept the demographic dynamics of Japan, our main market. For the first time in history, Japan is facing a permanent population decline. In fact, Japan’s population declined from a peak of about 128 million people in 2008 to about 124.6 million in 2023. Since this is a decrease of only 2.6%, many may not even realize that the population is declining. However, the decline in the number of births is remarkable. In 1965, when I was born, there were about 1.82 million births, but in 2022, there were less than 800,000 births, the lowest number in history. According to one study, Japan’s population is projected to fall below 100 million by 2056, and the number of births will fall below 500,000 by 2059. In other words, there is no question that Japan is facing a steep population decline going forward.
Furthermore, expectations are that the working-age population aged 15–64 will decline from its peak of approximately 87.16 million in 1995 to 74 million in 2023 and 52.75 million in 2050. Meanwhile, the percentage of seniors aged 65 and over continues to rise, reaching 28.9% in 2022. In other words, because the number of those working is decreasing, the number of people supporting those not working is not increasing, it will be impossible for the economy to keep growing. We need to take these demographic changes to heart and not remain stuck in a business model that assumes a steadily growing population and economy, as has been the case in the past.
Next is climate change, which is a global social issue and a growing risk. We cannot avoid this issue, both to pass on a better society to the next generation and for SOMPO to achieve sustainable growth. Natural disasters continued to rage in 2022, with insured losses of approximately 18.5 trillion yen, well over the 10-year average of 12.7 trillion yen. The intensification of natural disasters has been increasing by 5–7% annually for the past 30 years, and is expected to continue. As a Group whose core business is P&C insurance and which is expected to protect people from the risk of natural disasters, we must reconsider how we conduct business that enhances our resilience and ability to deliver peace of mind to our customers.
Moreover, supply chains have been disrupted by the COVID-19 pandemic, while inflation has continued at levels not seen in recent decades. Prices continue to rise more than expected in Japan, as evidenced by the higher-than-expected consumer price index released by the Bank of Japan in July of this year. In Japan, where deflation has persisted for a long time, not many people have experienced an economic environment of sustained inflation. Under such circumstances, it is necessary to constantly think about what to change and what not to change.
Most important of all is the transformation of customers’ values and needs that accompanies these changes in the business environment. For example, when it comes to insurance procedures, value in the customer experience is advancing by leaps and bounds, with insurance that can be easily purchased with just a few clicks on a smartphone, and video explanations of personalized policies, among other innovations. We need to provide new services that respond to the evolution and transformation of these customer expectations. In addition, preventive and pre-symptomatic needs that arise before insurance is needed, will continue to grow in the future.
Our business model up until now has certainly worked. In the future, however, as the external environment and assumptions change significantly, society will have no need for business models, values, and ways of working based on the past, no matter how successful they were before. I recognize that there are many issues that must be re-examined, including, for example, industry practices such as cross-shareholdings between companies and joint underwriting by several insurance companies under the same terms and conditions. Above all, we need to re-examine our own mentality and corporate culture.
We must accept these realities and truths without averting our eyes, accurately identify changes in customer needs, and develop concrete measures to address them. I am determined to take the lead in driving the transformation of the Group.
What we have been working on
To respond to changes in the external environment, we have been working on scale expansion and risk diversification in the current Mid-Term Management Plan. Since the establishment of Sompo Holdings in 2010, the Domestic P&C Insurance Business has generated the majority of the Group’s earnings. However, the P&C insurance business is strongly correlated with population, which means at some point we may face a situation where it stops growing, since as I mentioned earlier, we are in an environment of steady population decline. Therefore, in addition to embarking on earnings structure reform in the Domestic P&C Insurance Business, we have been pushing ahead with a reconsideration of the earnings structure and business portfolio of the Group as a whole, including the aggressive allocation of management resources to overseas insurance markets with high growth potential, and entering the nursing care market that is expected to expand as the population ages.
This effort has shown some results. The Group’s premiums written have grown significantly, mainly in our Overseas Insurance and Reinsurance Business from around 1.9 trillion yen in 2010 when Sompo Holdings was established, to nearly double at approximately 3.6 trillion yen in FY2022. I am also proud to report that our efforts towards scale expansion and risk diversification have had some success. For example, the ratio of the Overseas Insurance and Reinsurance Business to adjusted profit increased from about 15% in FY2020 before the start of the current Mid-Term Management Plan to about 43% in FY2022.
In the Japanese senior market, which is expected to expand, Sompo Group holds the No. 1 position in terms of the number of rooms for nursing care. We are seeing a good response from customers with an improving occupancy rate thanks to the expansion of nursing facilities and home-based offices, and the increasing productivity and sustained quality of our nursing care. As a result, sales in FY2023 are expected to exceed the targets set in our Mid-Term Management Plan.
There are two lessons I have learned through my experience as head of our nursing care business. One is the value of the nursing care business in enabling us to have daily contact with customers, something that is difficult to achieve with insurance. The second is the seriousness of the nursing care supply-demand gap; that is, the fact that staff involved in care cannot keep up with the increase in the number of seniors in need of care, which is a serious social problem. This is truly a national crisis that is not only a problem for Japan but is expected to be faced by other developed countries in the future, and a matter I believe SOMPO must face and solve for.
We have developed the “egaku” service as one solution to realize that vision. It enables visualization of the health status of residents in nursing care facilities and predicts the necessary support for seniors receiving nursing care. This solution not only enables appropriate services to be provided, but also reduces the burden on care workers. As a result, we expect it to improve productivity while sustaining the quality of care and improve engagement among caregivers. In turn, I believe this will contribute to closing the nursing care supply-demand gap.
We developed the “egaku” service using data sourced from nursing care users and others and technology from our partners, including Palantir, one of the world’s leading data analysis companies. We will use this data and technology to meet the true needs of our customers. This is the strategy incorporated into our Real Data Platform (RDP), of which the commercialized service “egaku” is the first step.
Going forward, we will use data and technology to meet customer needs, not only in the nursing care business but in various other Group businesses. Data from our customers will help us better understand their needs, and develop and provide new services for them. We will continue to build our platform for delivering this value.
Taking on the challenge of creating new value
Again, we need to change ourselves to better meet our customers’ needs. We need to rethink our organization, systems, and business model and build a structure that can respond seriously to customer needs and make quick decisions. Embedding diversity and inclusion in our organization is also essential to meeting and responding to these diverse voices and needs. That way, all executives and employees from the head office to the operational frontlines must listen to the voices of customers and other stakeholders, think proactively about what is required of us and what our end goal should be, and must speak-up and be heard within their respective organizations. Transforming into such a corporate culture is more important than anything else. To achieve sustainable growth, Sompo Group will work to strengthen resilience in the broad sense of building a strong and flexible organization that is more resilient to environmental changes.
On the financial side, in addition to the scale and diversification I mentioned earlier, we have achieved a certain level of success, such as improving investment income by having the Domestic P&C Insurance Business and the Overseas Insurance and Reinsurance Business work together as one with the aim of creating a conglomerate premium, but there is still much more to be done.
Our slogan for these efforts is “Building and Making Connections.”
The Overseas Insurance and Reinsurance Business has grown to a scale approaching that of the Domestic P&C Insurance Business, and the premiums written by the Group as a whole are already among the best in the world. Tightly connecting these two businesses should make it possible to further grow the P&C insurance business by boosting its expertise in insurance underwriting, boosting its efficiency through optimal underwriting risk retention and optimized operations, and offering its products on a global basis. Going forward, as a global P&C insurance group, we will properly assess our customers’ risks, provide optimal coverage, and further improve our resilience to protect people from a wide range of risks.
In the area of health and wellness too, I believe we can work more effectively by connecting the Group’s businesses. We are supporting the extension of healthy life expectancy, i.e., the ability of as many customers as possible to stay healthy for as long as possible, through the “Insurhealth®” product from our Domestic Life Insurance Business. In addition, our Nursing Care & Seniors Business is trying to contribute to closing the supply-demand gap in nursing care through the “egaku” service.
In the future, we intend to connect the services of these two businesses of life insurance and nursing care. We will use technology to connect the data from our customers, and then connect the services of various partners that support health and wellness. We will establish business-to-business connections, and use technology and data to connect with customers and stakeholders.
The Group will also provide solutions to the changing behaviors and needs of customers at each stage of their lives. To that end, we will connect the data from our customers to the various services offered by Sompo Group, including P&C insurance, life insurance, and healthcare, to support our customers take action to improve their health and wellness, and provide high-quality nursing care services as they age and need nursing care. In this way, we hope to evolve to be a companion in the lives of our customers.
I believe that the business environment and customer needs will continue to change, but rather than averting my eyes from the realities and inconvenient truths facing Sompo Group, I will seize these opportunities and lead reforms that promote growth. With the trust of our stakeholders, which is more important than anything else, I will continue to work hard to improve the Group’s corporate value and realize SOMPO’s Purpose.
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