Domestic P&C Insurance Business
Message from the Business CEO

SJ-R aims to create a “new Sompo Japan Insurance Inc.” as part of our company-wide transformation in response to issues and changes in the domestic P&C insurance industry.

As the social climate changed, our management did not immediately notice the limitations of our current business model and the heavy burden it placed on our front-line employees. Subsequently, as a result of mergers and alliances in the 2000s, an oligopoly formed by a few major companies emerged. This made it difficult to engage in competition based on the inherent value of insurance, such as the quality and price of products and services, and this situation has continued up to the present day.

Meanwhile, the increased volatility of insurance claim payments made it difficult to predict based on historical data. In an era when the volatility of insurance claims was relatively small and income and expenditure projections were easier to make, the idea was that even if there were some unprofitable policies, they could be absorbed, and profits could be secured by simply increasing sales. However, since around 2018, natural disasters have become more severe and frequent, and more recently, inflation has become an issue. As a result, this structure has largely collapsed, and we find ourselves in a situation where we cannot ensure profits simply by increasing sales.

The large global P&C insurers with which we compete have clear risk appetites that reflect their own strengths and risk tolerance. They clearly and proactively communicate their approach to risk and the products they sell to the outside world, and design products and develop sales strategies based on that. The business practices and competitive environment of Japan's P&C insurance industry are very different from the rest of the world.

The Company must take the lead in achieving transformation, and the SJ-R project is a strategy to significantly transform our existing business models and ways of working, in pursuit of the resilience and uniqueness that will allow us to survive in the harsh environment of the future.

We are determined to break away from the systemic problems of the industry by transforming our culture, which is the result of shared experiences of employees over many years. I am also well aware that it will not be easy to improve the profitability of the core insurance business, which has declined due to the harsh changes in the external environment, and achieve a “new Sompo Japan Insurance Inc.”

To truly change, we have to start by altering the way we work and our business model. It is not just our culture that needs to be changed; it is everything from the business model and operating methods, to the personnel system. We are in the process of formulating and establishing the action plan necessary to achieve this goal and have designed a KPI system that covers financial areas such as risk exposure, loss ratio and company expenses, as well as non-financial areas such as business processes (including quality assurance), corporate culture and human investment. This will involve transforming everything, including the way work is done in the Sales, Product, and Claims divisions and even the personnel system.

The ultimate goal of this transformation is to increase the value Sompo Japan Insurance Inc. provides to its customers. We will strengthen our resilience so that we can generate stable profits, make solid investments to increase the value we provide to customers and provide solid returns to both our employees and shareholders. By establishing such a cycle, we will create unique value that can only be found at Sompo Japan Insurance Inc. and the Sompo Group and cannot be obtained elsewhere, and then deliver it to customers at a fair price. This is the ultimate goal of the SJ-R project.

SJ-R also recognizes our business model has different characteristics in the retail and commercial sectors. In retail, it is important to differentiate ourselves from competitors in areas other than coverage. For example, there is the uniqueness and convenience of the services attached to insurance, and whether to carry this out in-house or through external resources. Another long-standing challenge in the retail sector is the issue of the dual structure of the Sales Division side and the agency side that need to be reassessed to increase their respective productivity and efficiency, to improve the value we provide to customers, including our claims service process.

In the commercial sector, a high level of expertise is key. So far, the brokerage system, which is mainstream in Europe and the United States, has not taken root in Japan. Similarly, on the corporate side, there are currently few companies that have risk managers unlike their counterparts in Europe and the US. In the future, however, the commercial sector environment will become one in which companies compete on the intrinsic value of their insurance. As a result, insurance companies will be required to understand and analyze the risks of their clients and provide optimal risk solutions as not everything should be hedged with insurance. Traditionally, our main role has been to provide insurance, but going forward, we will need to propose not only insurance but also risk management services aimed at risk retention or reduction, including from the perspective of economic rationality. There is an urgent need to develop individuals with a high level of expertise who are capable of making such proposals.

SJ-R’s plan is only 50% complete at this point. As the CEO, however, I have a firm determination to see through this major transformation, understanding that Sompo Japan Insurance Inc. needs to be able to provide unique, superior value to customers that differentiates us from competitors. I am committed to realizing a “new Sompo Japan Insurance Inc.” that our people and their families can feel proud of.