[Sharp Rise in Life Insurance Cancellations] Why Are Young People Turning Away from Insurance? An Explanation of Necessary and Unnecessary Insurance Policies

“I’ve been paying my life insurance premiums every month without really thinking about it—is it really okay to keep doing this?”

In recent years, the number of life insurance policy cancellations has surged. In particular, a trend of people “turning away from insurance” is accelerating, especially among younger generations in their 20s and 30s, and it is said that even insurance companies—whose sales operations have traditionally relied on face-to-face interactions—are finding it increasingly difficult to secure new policies.

In this article, we’ll explain the reasons behind the sharp rise in life insurance cancellations, why young people aren’t buying insurance, and how to distinguish between “insurance you really need” and “insurance you don’t need” so you don’t lose money.

Why Are Life Insurance Cancellations Surging?

As shown in the video, the data reveals that life insurance surrender values have increased by approximately 50 percent compared to the same period last year—a truly astonishing figure. The total amount of
surrender values has exceeded 3.8 trillion yen, and policies are currently being canceled at an unprecedented rate.

Why has the number of cancellations increased so much? The main reasons can be summarized in the following three points.

(1) Growing “distrust” toward insurance companies and sales representatives

Reports in the news and elsewhere about inappropriate sales practices and aggressive sales tactics by some insurance companies have shaken “confidence in the insurance industry as a whole.” An increasing number of people who signed up for policies simply because a salesperson—a
relative or acquaintance—told them to do so are now taking a step back and wondering, “Was that coverage really too much for me?”

② The widespread adoption of “comparison and review” driven by the rise of online insurance

We’ve entered an era where you can easily compare insurance premiums and coverage details using just your smartphone.
While it used to be common practice to simply sign up for the plan presented by a sales representative, more and more people are now using social media and comparison sites to find out which products truly offer the best value for them—a trend that’s leading to the cancellation of unnecessary insurance policies.

③ A Renewed Appreciation for Generous “Public Programs”

Japan has one of the most comprehensive social security systems in the world.
The existence of public support programs, such as the High-Cost Medical Expense Reimbursement System and sickness benefits, has led more people to realize that “the government’s system provides sufficient coverage without having to pay high premiums for private insurance”—a major factor behind the surge in policy cancellations.

Three Social Factors Behind Young People’s Growing Disinterest in Insurance

Along with the rise in policy cancellations, there has been a noticeable trend of people in their 20s and 30s “turning away from life insurance.” The reason young people are no longer
purchasing insurance is not simply due to the economic downturn.

【若者の保険離れをもたらす3つの要因】
1. コスパ重視（リターンが見えないものへの投資を忌避）
2. 家計の余力低下（物価高・実質賃金の伸び悩み）
3. 加入機会の減少（職場や知人経由の強引な勧誘の減少）

① Value for money: I don’t want to pay for things where I can’t see the results.

Life insurance is a product that pays out “in the event of an accident or illness in the future.” If
nothing happens, the premiums paid are often lost, so the return on investment can be considered uncertain.

Younger generations, including Gen Z and Millennials, tend to prioritize rationality and value for money. Rather than paying several thousand to several ten thousand yen each month for “risks that could materialize at any time,
” it’s only natural for them to want to spend their money on “wealth-building strategies with measurable results”—such as the New NISA or index investing—or on self-improvement.

(2) Reducing fixed costs due to high prices and sluggish real wage growth

With prices continuing to rise while take-home pay isn’t increasing significantly, many young people are reviewing their household fixed expenses. Along with
rent and communication costs (such as switching to budget SIM cards), “life insurance policies where the reason for having them is unclear” are among the first to be cut.

③ A Decline in the “Reasons” for Joining Themselves

In the past, it was common for insurance salespeople (such as “sales ladies”) to visit workplaces after employees started their jobs, or for people to simply sign up for insurance at their parents’ recommendation.
However, due to stricter compliance regulations and the rise of remote work, workplace solicitations have plummeted. As a result, people no longer have opportunities to encounter insurance unless they seek it out on their own.

Why Experts Categorically State That “Health Insurance Is Generally Unnecessary”

Some people argue that “health insurance is basically unnecessary.” We often see health insurance ads on
TV and elsewhere, but why do some people go so far as to say it’s unnecessary?

(1) Health insurance is a “cash cow” for insurance companies.

Health insurance is typically sold at affordable rates—starting at “2,000 to 3,000 yen per month”—which makes it easy for people to sign up, as the psychological barrier to enrollment is low.
However, this also means that, from the insurance companies’ perspective, it is a “low-cost, high-profit product” (a cash cow).

A monthly fee of 3,000 yen can easily lead to a situation similar to “ghost memberships” for video streaming services or gyms, where the policy is often left untouched for years without the policyholder ever properly reviewing the coverage details.
It’s not uncommon for people to pay 36,000 yen a year—totaling 360,000 yen over 10 years—only to receive benefits amounting to just a few ten thousand yen.

② Japan’s public programs (the High-Cost Medical Expense Program and Sickness Allowance) are too generous

The main reason why it is not necessary to purchase private health insurance lies in Japan’s public health insurance system.

• High-Cost Medical Expense Program
  : A system that sets a cap on the amount of out-of-pocket medical expenses incurred in a single month. For salaried employees with
  average incomes, this cap limits their out-of-pocket expenses to approximately 80,000 to 90,000 yen per month, regardless of how advanced the treatment they receive may be.
• Sickness Allowance
  : A program that provides approximately two-thirds of your salary for up to one year and six months when you take time off work due to illness or injury (*Available to private-sector employees and civil servants).

In other words, even if you need to be hospitalized or undergo surgery temporarily due to an illness or injury, having savings of around several hundred thousand yen on hand—combined with public assistance programs—will be more than enough to get you through it.

Definition of Truly Necessary Insurance: “The Risk of Large Expenses You Cannot Cover Yourself”

So, is all private insurance a waste? Mr. Sugawara isn’t saying that “insurance itself is bad.”

The fundamental purpose of insurance is to “protect against ‘enormous risks’ that rarely occur but, should they happen, would be absolutely impossible for you or your family to cover on your own.”

Examples of When Insurance Is Needed: Corporate Insurance for Business Owners to Protect Against Loans

A specific example is a case where a company executive has taken out a large bank loan.
If the executive dies, there is a risk that a substantial debt will be left to the company or the executive’s family.

For example, if you have a “200 million yen loan,” you should take out a life insurance policy for “300 million yen,” which is 1.5 times the loan amount.
Why 1.5 times?

• The Tax Barrier
  : If a business owner passes away and the company receives 300 million yen in insurance proceeds, that amount is treated as “extraordinary income” and is subject to corporate income tax.
• Based on an actual estimate
  of 300 million yen in insurance proceeds, corporate income tax (approximately 30% to 35%, or about 100 million yen) will be deducted, leaving the company with approximately 200 million yen in cash.
• As
  a result, we will be able to successfully pay off our debt of exactly 200 million yen.

As such, the proper way to use insurance is to specifically cover “risks ranging from tens of millions to hundreds of millions of yen—risks that you simply cannot afford to pay for on your own.”

[By Age Group and Circumstances] Criteria for Determining Whether You Need Life Insurance

If you’re unsure whether you should get insurance, please refer to the chart below.

The Best Strategy for Young Adults (Single)

For young people who are currently single and have no family to support, it makes far more sense to use the money they would spend on monthly insurance premiums for “regular investments through the New NISA” or “investing in themselves to improve their skills.”

If you invest the money you would otherwise spend on insurance at an annual rate of about 5%, you can build up a substantial “personal net worth” over the course of several decades—enough to more than cover the risk of illness.

Action Plan for Reviewing Your Insurance

If you’d like to review your current insurance policy or are considering canceling it, please follow the steps below.

1. Gather the insurance policies you currently hold and visualize
   the coverage details to understand what risks you’re protected against and how much you’re paying for that protection. Insurance policies whose
   coverage details you don’t understand are pointless to have in the first place, as you’re likely to miss out on claims.
2. Calculate
   the “amount that would truly cause financial hardship.” Determine the exact figures for “how much you’d need each month if you became ill” and “how much your surviving family would need for living expenses.” Be sure to subtract the amounts covered by
   public pensions and the high-cost medical care support system.
3. If you have saved enough emergency funds (enough to cover living expenses for about half a month to one year) to
   consider canceling or reviewing your health insurance and riders, you should prioritize canceling your health insurance.
4. Get
   Affordable “Term Life Insurance” That Covers Only What You Need If you only need coverage for the period until your children grow up, the golden rule is to choose “term life insurance (such as term life insurance or income protection insurance),” which has significantly lower premiums than savings-type policies.

Summary: Insurance isn’t about “having peace of mind just by having it,” but rather “having only what you need.”

Life insurance is far too expensive a purchase to keep paying for simply because “everyone else has it” or “I feel a little uneasy.” It’s not uncommon for the total premiums paid
over a lifetime to range from several million to tens of millions of yen.

The trend in recent years of young people turning away from insurance is not a matter of indifference or rash judgment, but rather a rational choice resulting from serious consideration of “how to understand the public system and protect one’s own assets.”

Let’s move beyond the mindset of “buying peace of mind with money” and start making truly “smart insurance choices” that are tailored to the life stages of ourselves and our families.