The motor insurance industry in Japan is projected to grow at a compound annual growth rate (CAGR) of 1.8% from JPY5.8 trillion ($39.3 billion) in 2026 to JPY6.2 trillion ($44.1 billion) by 2030, in terms of gross written premium (GWP), according to GlobalData, a leading data and analytics company.

According to GlobalData’s Global Insurance Database, the Japanese motor insurance market, which declined consecutively during 2021-23, grew by 1.6% in 2024 and is estimated to register a modest 1.4% growth in 2025.

Japan’s motor insurance market is entering a measured phase of recovery driven by premium rate adjustments, regulatory developments, telematics-led product innovation, and a strengthened focus on profitability. Furthermore, increased vehicle safety features, which have reduced the number of road accidents, are expected to support insurers’ profitability.

Swarup Kumar Sahoo, Senior Insurance Analyst at GlobalData, comments: “Within Japan’s broader general insurance landscape, motor is rebounding on higher premium rates, rising vehicle sales, and the introduction of a new risk-based rate classification in 2025. The growth of motor insurance will be further supported by consumer awareness driven by rising claims from natural disasters.”

A rebound in auto sales is expected to support the growth of motor insurance during 2025-30. According to the Japan Automobile Manufacturers Association (JAMA), automobile sales during January-September 2025 grew by 5.0% compared to the same period in 2024. The growth was mostly supported by mini passenger cars (11%), small trucks (10%), and large buses (22%).

Additionally, the increase in insurance rate driven by inflation-led rising repair costs and increasing payouts due to natural disasters will boost premium growth. The motor insurance premium rate is expected to increase for the second time this year after the January 2025 hikes. Premium rate is expected to increase by 6% to 8.5% in Q4 2025.

Catastrophe risk remains a defining driver of Japan’s motor insurance market dynamics. Catastrophe-linked vehicle damages from floods, typhoons, and hailstorms have elevated claims volumes and underscored the importance of adequate sums insured and rapid settlement.

According to the General Insurance Association of Japan, the August 2025 Kyushu–Yamaguchi flooding alone triggered nearly 17,000 auto claims totaling about $87 million, spotlighting climate exposures embedded in motor portfolios. Similarly, the hailstorm in Hyogo in 2024 generated auto claims worth $590 million. Motor insurers are prioritizing disciplined underwriting over volume growth, reflecting capacity and reinsurance pressures amid elevated cat losses.

Sahoo adds: “The introduction of the risk-based rate classification and model-specific rate system, effective January 2025, will support motor insurance growth. Under this, insurance premiums are determined based on the specific make and model of the insured vehicle, rather than applying a uniform rate across broad vehicle categories. This granular classification allows insurers to more accurately price the risk profile associated with each vehicle model, considering factors such as accident frequency, repair costs, and claims history unique to that model.”

Electric mobility and technological advancement are also reshaping auto risk, with insurers expanding electric vehicle (EV)-focused products and usage-based pricing as part of broader motor innovation. Telematics-enabled solutions and AI-driven claims platforms are improving risk differentiation and service levels, aligning with the needs of EV owners and connected vehicles. Product launches such as Drive Agent Personal telematics plan, leveraging connected dash cams and incident video, will support safer driving behaviors and faster claim resolution for EV and ICE motorists starting January 2026.

Sahoo concludes: “Japan’s motor insurance industry is set for a steady, sustainable expansion, benefiting from rate adequacy, regulatory modernization, and product innovation. Telematics-led propositions, Insurtech partnerships, and cloud-enabled claims will raise efficiency and customer satisfaction, while improved catastrophe modeling enhances pricing precision. Insurers that invest in technology, product innovation, and robust risk management will get the competitive advantage in the years ahead.”