Guest Post: Hoken Shavings into Savings

A great guest post for you today. I have paid far too much in insurance premiums during my time in Japan, as insurance is very much part of the culture here and to be honest, I just didn’t know any better.

​Read on for an in-depth look at one man’s struggle to repel the overpriced premiums. Huge thanks to Paul for writing today’s post for us.
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​​Private insurance is a robust industry in Japan, despite the fact that most or all working age people have a requirement to pay into government approved insurance policies like the shakai hoken system.  

In fact, whether it’s due to excess savings, lack of knowledge about other investment vehicles, or just a need to feel a sense of security, Japanese consume insurance policies at a rate higher than most developed countries.

Until recently, in addition to paying into the shakai hoken system, my wife and I each had our own private insurance policies. We both were enrolled in a Life and Supplementary Health Insurance policy at one of the major Japanese insurers. My wife’s policy (taken out before we first met) also had an investment portion. As the primary breadwinner in the family, I understood that having a decent life insurance policy is a must in case something happened to me, so I agreed to sign up for my own policy. The supplementary health insurance covered things that the shakai hoken doesn’t cover completely, or at all, such as extended hospital stays, specialty treatments and comprehensive coverage in case of cancer.

I didn’t carefully consider our insurance at all, I just followed what my wife (and mother in law) suggested.  That is, until we started planning on buying a house. Suddenly it became time to pull our heads out of the sand and take a genuine look at our finances to see what we could afford, and how we could cut our spending to make our future more secure. We made some easy fixes to our budget in the beginning, such as cancelling an expensive bottle water service and changing to a slightly more inconveniently located, but much cheaper supermarket.

After several years of making the necessary insurance payments, I had become aware that quite a bit of our monthly budget was going to these private insurers. 7.1% of my yearly salary, to be exact. However, I did not know if this was abnormal or a typical amount.  I gently broached the subject of altering our insurance plans to my wife. I say “gently”, because I knew that she considered those policies as ‘peace of mind’ and would resist changing them.

After we had decided on a house builder, they were kind enough to set us up with a financial planner to discuss our long term loan payment prospects and analyze our income and spending. The primary suggestion the planner made was what I suspected – we were paying far too much for insurance. First of all, neither of our policies made sense for our life situation. As I mentioned, my wife took out her policy before we were married. It had a very large life insurance benefit, and had supplementary medical coverage that had become unnecessary due to the shakai hoken I was receiving through work. That’s right, we were paying monthly for two different policies covering the same thing. The financial planner suggested we trim down my wife’s policy and make the life insurance benefit in mine a little more robust.

We contacted the company who handled our insurance and the representative met with us a week later. She brought us several different plans and we went with another pair of bundled plans that cost less overall. I say overall, because my wife’s plan was nearly halved, while mine became slightly more expensive. After filling out the paperwork and signing the documents our private insurance would consume now about 6.1% of my yearly salary.  I felt we had made progress, but I still was unsatisfied with the amount we were paying.

My wife and I had a discussion, and decided we needed to check out the insurance market more thoroughly. We had cut our bill, but we were still with the same company and had no idea if what we were getting was fair. We knew that insurance help and planning is available through more generalized insurance sales companies or madoguchi storefronts. Because they do not represent a single company, they can introduce a number of policies from multiple insurers.

When we visited, the planner walked us through some simulations based on our age, situation and desires. For example, we decided we were not interested in using insurance as an investment/savings vehicle, so cutting that from the picture was an easy step. The single most important piece of information we learned was that by bundling policies with a single company, we were paying more. By splitting our life insurance policies apart from the medical policies from the cancer policies and spreading them across several companies, we would save even more money. After a small mountain of paperwork, my wife has policies between two companies, while I have policies spread over three. In the end, we dropped the original 7.1%, then 6.1%, to a final 5.4%. This is certainly a more manageable amount.

Just to be sure, we have a meeting with another financial planner on soon to get a verdict and possibly further advice.  My advice for now at least is this, shop around and don’t bundle your policies!

Fantastic advice from Paul, and a reminder to us all to keep an eye on where the money goes and what exactly we’re getting in return.

Some more facts from Paul (found out talking to Sumitomo Planning after writing this post):

1. Average supplementary insurance payments for those who have it is around 35,000.
2. That works out to be about 10% of a yearly salary.
3. That includes investment type plans.  As I said, we are paying about 6%, but with no investment plans.

Anyone else have any insurance tips?
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