TOKYO —

For the last 10 years, the insurance industry has been undergoing many changes. Liberalization has made the Japanese market much more competitive. One of the biggest foreign players in the industry is AIG, which has had a presence in Japan since 1946. In fiscal 2006, AIG insurers’ total premium income was about 2.369 trillion yen out of a 35.8 trillion combined market, a 6.6% share of combined life/non-life premiums. AIG’s five wholly owned insurance companies, which include ALICO Japan, AIG Star Life, AIG Edison Life, AIU Insurance and American Home Assurance, one joint venture insurance company called JI Accident & Fire, as well as 30-plus smaller subsidiaries employ approximately 26,000.

Overseeing the general insurance operations for AIG in Japan and South Korea is Jeffrey Hayman, regional president and chief operating officer, who has been in Japan for the past 10 years. Born in Saint Paul, Minnesota, Hayman holds a B.A. degree in economics and political science with honors from Saint Olaf College in Minnesota, and an MBA from the University of Hartford. Hayman has worked in the insurance industry for 25 years. In addition to his current duties with AIG, he serves as chairman of the Foreign Non Life Insurance Association.

Japan Today editor Chris Betros visits Hayman at his office in AIG Tower in Kinshicho, Sumida Ward, to hear more about the insurance industry

What is AIG’s history in Japan?

AIG started here in 1946 as AIU, the largest of our general insurance businesses. At that time, they handled insurance for U.S. military personnel and the business grew from there. American Home has been in Japan since the 1960s and we started life insurance operations in the 1970s. Over the last 10 years, we have greatly expanded our presence into real estate, asset management and investment, as well.

How high is customer awareness of AIG companies?

It depends on the segment. In general insurance, for example, our American Home subsidiary is very well known in Tokyo, Osaka and Nagoya, whereas AIU, which has a small to medium-size business base, is well known among businesspeople.

How’s business?

We’ve been very successful in penetrating the major commercial market. We have got more than 200 of the top 500 companies in Japan as clients. That’s quite an area of accomplishment for us.

Are there any differences between doing business in Japan and the U.S.?

The most important difference has nothing to do with culture or language. For the general insurance business, or what they call here the non-life insurance business, the most important thing is that up until the late 1990s, this was a totally regulated industry. Every company sold exactly the same product at exactly the same price. Beginning in 1996, commercial insurance was liberalized, followed by auto insurance in 1998, and in 2001, third sector accident and health, life and general insurance companies were able to cross over somewhat.

How did that affect the industry?

A competitive market developed. However, many companies have only had a few years’ experience of product differentiation, customer segmentation, matching products and distribution channels to the needs of customers. Many employees who spent up to 30 years in the business in a highly regulated environment have had to be retrained and learn almost a new industry. So there are areas that have not evolved as much here as in the U.S. The concept of risk management is one example.

Another change is that there were a lot of mergers between Japanese companies. Some foreign entrants have come and gone, either because they didn’t have the right business model or their timing was too late. On the other hand, there have been startups that have been reasonably successful.

Are insurance products in Japan different from overseas?

On an individual level, auto insurance here is very much like auto insurance in other countries. But in this market, unlimited liability coverage is still available, which is a rarity these days. That’s what people in Japan want to buy because the attitude is they want to be able to satisfy the social responsibility of paying for the damage that’s been caused. Whereas the idea in the U.S. is that you buy enough insurance to protect your assets. People here don’t want to buy deductibles. If they have a loss, they want to be paid from the first yen, not after a deductible.

What are AIG’s strengths?

One of our competitive strengths is the quality of our sales force, be that brokers, employee agents, professional independent agents or our people on the telephones. They have allowed us to attract the market share that we have, and to give consumers the product that they want.

Yes, there were some embarrassing issues which impacted on the image of the whole industry. For example, there were some claims not properly paid and some improper denials of claims. The entire industry has been through a very rigorous review process to root out all the errors and repay any money plus interest and put controls in place to make sure it doesn’t happen again. But the damage to our collective reputations will take time to repair.

How do you handle complaints?

I receive a daily report on the number and type of complaints being lodged. We try to make sure that our decision is correct, based on the contract, our service standards and we very carefully track and monitor all complaints to try and resolve them to the customer’s satisfaction.

How do you market the various companies?

For American Home, which is a direct marketing company, we do newspaper and TV advertising for specific products. We’ve very active in e-business in terms of being on search engines. E-business is a growing sector, especially in automobile insurance through American Home and also travel insurance with AIU. You can purchase products online. American Home was the first insurance company in Japan to offer online credit card payment.

AIU is the sole general insurance sponsor of the Japan Olympic team and we utilize that in our advertising to show our commitment to the Japan market. It started with the Turin Winter Olympics (in 2006) as part of our 60th anniversary celebration.

Is AIG active in CSR? 

Yes. First, each company is involved in a variety of philanthropic and/or community programs. For example, AIU has for more than 20 years sponsored a high school diplomats program, in which we send Japanese students to the U.S. and bring U.S. students to Japan. AIU has also arranged for Japanese Olympic athletes to visit schools around the country and run clinics for kids. American Home conducts an outreach program in cooperation with New York City Ensemble in Okinawa, and supports Kidzania, which provides fun, life-like work experience for kids, in Tokyo.

Second, we have programs at an AIG level, supported by all group companies in some areas where we have a large presence. For example, in Toyama, we will support “AIG Collection” exhibition this summer, which exhibits more than 50 famous paintings from French Impressionists through Echo de Paris era. In Sumida Ward, where we have around 7,000 employees working, we have been conducting community programs in cooperation with the New Japan Philharmonic.

Where do you get your staff from?

Being a growing business, we have a great need for staff and we use probably every method to recruit. We have a nicely sized intake of new college graduates, but we also hire experience and mid-career staff.

What do you think draws graduates to AIG?

In some instances, they are studying mathematics and want to become actuaries. Others are interested in direct response marketing and know that ALICO and American Home are large profile advertisers. Many want to work for an international company. We have programs for young employees to go on short-term trips overseas to be exposed to other businesses.

What is your management style?

It depends on the abilities of the individual. Some need hands-on assistance, and some don’t. If you can get things done, then we just touch base periodically.

Do you have a lot of meetings?

I would like to have fewer meetings but I pretty much have them all day, though not all in the office, nor are they all with employees. As chairman of the Foreign Non Life Insurance Association, I have outside commitments within the industry. I meet with other CEOs, the FSA and industry association people often in the morning. Then I’ll come back here for regular updates with departments to find out how they’re doing.

How early do you start your day?

I get up about 6. I spend a little time exercising three mornings a week. If I don’t have meetings first elsewhere, I get to the office around 8. I try to leave between 6 and 7 p.m., but very often, I have to attend receptions or seminars or dinners with a broker or major client. Several nights, I am on the phone to HQ in New York.

How do you like to relax?

I play the guitar, and I play and sing at my church on occasion. You might also find me at establishments like Legends sports bar or Hobgoblin pub, Panic Café for teppanyaki, La Bisboccia for Italian and Cicada in Hiroo for Mediterranean.

3 Comments

• 

  anderstungtwist at 09:03 PM JST - 27th April

  For the last 10 years, the insurance industry has been undergoing many changes. Liberalization has made the Japanese market much more competitive.

  What might that be?

  One thing that has happened to the insurance industry and is easy to understand is the internet. It's just amazing how being able to compare rates has driven rates down, especially for term insurance.

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  Shark_09 at 04:08 AM JST - 29th April

  What has been the direct impact on the consumers? Comparing Sweden's highly regulated health insurance market to the US's mostly unregulated health insurance market it is clear that the US insured get the short end of the stick.

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  illsayit at 10:46 PM JST - 10th May

  Go away insurance companies! Less meetings? thats really reassuring?

  Japans market is susceptible to falling prey to insurance companies....again!

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