Nippon Life Insurance Co. is planning its first increase in 21 years in the investment yield promised to policyholders of some products, which means that new policy buyers will be paying less in premiums, sources said Sunday.
Japan's largest life insurer wants to keep its products competitive against other investment vehicles as interest rates are likely to increase amid growing expectations the Bank of Japan will soon end its quantitative easing monetary policy, the sources said.
The range of increase by Nippon Life is 0.05 to 0.1 percentage points, which will translate into a cut of around 1 percent in premiums for buyers of policies that require advanced lump-sum premium payments, effective Feb. 1, the sources said.
Other major insurers may follow suit, given that prices of stocks, in which they invest, have been rising recently.
In the low-interest rate period after the bubble economy collapsed in the early 1990s, insurance companies suffered losses because their investment returns fell short of the yields they promised policyholders.
Nippon Life has been lowering the yield in phases since 1990. It last increased the yield in April 1985.
Among Nippon Life's policies requiring single-premium payments, endowment insurance and annuities will see an increase to 1.1 percent from 1 percent in the so-called guaranteed yield.
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