DIRECT MOTOR COVER SALES IN JAPAN SHOW SIGNS OF TOPPING OUT

Growth in the direct motor cover sector in Japan is showing signs of slowing after a decade in which the once innovative distribution channel has continually taken a greater proportion of the motor insurance market from more traditional distribution channels, according to a Nihon Keizai Shimbun analysis. Net premiums among the six major direct sellers last year came to ¥130bn, up 12% year on year, but this compares with a year on year expansion rate of 32% from 2003 to 2004. Two main reasons were put forward by insurers for the slowing in the growth rate. One was that the direct sales business model, which competes mainly on price, had lost its freshness. Some of the insurers, such as Mitsui Direct, have stopped mass advertising, moving instead to search-engine based advertisements. Zurich, meanwhile, has shifted some of its spend to cable TV and local magazines. The second reason for the fall-off in growth has been greater price competition from the traditional distributors. Direct motor still only has 5% of the motor market in Japan, with conservative customers concerned about what will happen if they have a claim. Some of the direct players are developing other distribution channels, including tie-ups with life assurers. American Home Assurance plans to increase sales through a link-up with fellow AIG affiliate AIG Star Life.