Kathmandu. Under Japan’s new insurance sales rules, agencies working with many insurance companies will now be required to explain to customers why a recommended product is right for them. These recommendations should be based on customer needs rather than business relationships. This can increase agencies’ operating costs and put pressure on their profit margins.
These regulations, which will go into effect on March 1, 2028, require agencies to further refine product comparisons and explain why the recommended policy is appropriate for a particular client. These changes follow practices involving concerns that motor insurance dealerships and advertising payments are impacting life insurance recommendations.
According to Rachit Madan, head of financial services research at Mordor Intelligence, these reforms will change the way agencies recommend products to customers. “The change now is that instead of relying on their long-standing relationship with insurance companies, agencies need to certify that their recommendations are based on customer needs,” Madan said.
In the case of motor insurance, agencies will need to focus on coverage and premiums rather than letting dealership relationships dictate product selection. Recommendations for life and medical insurance should be tailored to the customer’s safety needs, budget, and long-term financial preferences.
According to Madan, the cheapest policy is not always the best. “Exclusions, claims services and the client’s personal circumstances all influence the decision,” he said, adding that these changes can increase training and system-related costs, especially for agencies that work with many insurance companies. ’
Large dealerships will have to manage conflicts of interest between vehicle sales and insurance distribution. Life insurance agencies and financial planners will need more robust processes to validate their advice. “I would say that it may put pressure on profit margins, but that doesn’t mean that the model that works with many insurance companies is in jeopardy,” Madan said.
In addition, Japan reduced the minimum security deposit for independent insurance brokers from 20 million yen to 10 million yen in June 2026. This made it easier to enter the sector. “Large agencies can spread the additional costs of their operations while maintaining the advantage of offering products from multiple insurance companies to customers,” Madan said. -Agency
