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Competition
Japan
In 1974, Aflac was granted an operating license to sell life insurance in Japan, making Aflac the second non-Japanese
life insurance company to gain direct access to the Japanese insurance market. Through 1981, we faced limited
competition for cancer insurance policy sales. However, Japan has experienced two periods of deregulation since we
entered the market. The first came in the early 1980s, when nine mid-sized insurers, including domestic and foreign
companies, were allowed to sell cancer insurance products for the first time. The second period began in 2001 when all
life and non-life insurers were allowed to sell stand-alone cancer and medical insurance products as well as other stand-
alone health insurance products. As a result, the number of insurance companies offering stand-alone cancer and medical
insurance has more than doubled since the market was deregulated in 2001. However, based on our growth of annualized
premiums in force and agencies, we do not believe that our market-leading position has been significantly impacted by
increased competition. Furthermore, we believe the continued development and maintenance of operating efficiencies will
allow us to offer affordable products that appeal to consumers. Aflac is the largest life insurer in Japan in terms of cancer
and medical policies in force. As of December 31, 2016, we exceeded 24 million individual policies in force in Japan.
Aflac has had substantial success selling cancer policies in Japan, with more than 15 million
cancer policies in force
as of December 31, 2016. Aflac continued to be the number one seller of cancer insurance policies in Japan throughout
2016. We believe we will remain a leading provider of cancer insurance coverage in Japan, principally due to our
experience in the market, low-cost operations, expansive marketing system (see Distribution - Japan above) and product
expertise.
We have also experienced substantial success selling medical insurance in Japan. While other companies have
recognized the opportunities that we have seen in the medical insurance market and offered new products, we endeavor
to make our products stand out for their value to consumers.
U.S.
Aflac competes against several voluntary supplemental insurance carriers on a national and regional basis. We
believe our policies, premium rates, and sales commissions are competitive by product type. Moreover, we believe that
Aflac products are distinct from competitive offerings given our product focus (including features, benefits, and our claims
service model), distribution capabilities, and brand awareness. For many companies with which we compete, voluntary
supplemental insurance products are sold as a secondary business. A growing number of major medical and life
insurance carriers are also entering into the voluntary supplemental insurance market. For Aflac, supplemental insurance
products are our primary business and are sold via a distribution network of independent sales associates and brokers
(see U.S. Distribution above). Aflac's advertising campaigns have increased our name awareness and understanding by
consumers and businesses of the value our products provide.
Both private and publicly-traded insurers offer major medical insurance for hospitalization and medical expenses.
Much of this insurance is sold on a group basis to accounts that are both fully and self-insured. The federal and state
governments also pay substantial costs of medical treatment through various programs. Major medical insurance
generally covers a substantial portion of the medical expenses incurred by an insured. Aflac policies are designed to
provide coverage that supplements major medical insurance by paying cash directly to the policyholder to use for
expenses their major medical insurance is not designed to cover. Thus, we do not compete directly with major medical
insurers except those who sell supplemental insurance products as a secondary business. Any reduction of coverage,
increase in employee participation costs, or increased deductibles and copayments by major medical commercial or
government insurance carriers could favorably affect our business opportunities. Since the implementation of the
Affordable Care Act (ACA)
beginning in 2010, some employers have shifted a larger burden of the cost of care to their
employees, primarily through increases in premiums, copays, and/or deductibles. Since Aflac products provide an
additional level of financial protection for policyholders, we believe the increased financial exposure some employees may
face creates a favorable opportunity for our products. However, given the profitability erosion some major medical carriers
are facing in their core lines of business, we have seen a more competitive landscape as they seek entry into Aflac's
supplemental product segments in an effort to offset this impact.
One Day Pay
SM
is a claims initiative that we have introduced at Aflac U.S. to process, approve and pay eligible claims
in just one day. We believe that along with our brand and relevant products, this claims practice has helped Aflac stand
out from competitors.
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