Insurance Business Executives Tremble at Word of New Financial Services Minister
10, 18. 2006
Japanese insurance business executives trembled at what Yuji Yamamoto, new State Minister for Financial Services, said. Shortly after his appointment to the post in the formation of the cabinet by new Prime Minister Shinzo Abe, Yamamoto expressed his determination at a press conference that he would go to the bottom of the problem arising from the insurance comapanies’ failure to pay insurance. The dominating view in the insurance business world was that, “There is a strong opinion within the Liberal Democratic Party that the Financial Services Agency is taking a too cold stance toward the insurance industry. There will be no further probe on the issue.” At the press conference, however, such word as “denunciation” was heard and this apparently frightened the business executives.
Financial Services Minister Yamamoto denouncing insurance business
Two major companies in the nonlife insurance business have received the administrative punishments, including suspension of business, for failure to pay insurance. This led to the re-inspection and requiring the companies to report by the end of September on the insurance payment failure on the special contracts accompanying the main auto insurance contracts, which had already been inspected and reported in 2005. Furthermore, a report is due to be submitted by the end of October on whether or not there were cases of non-payments of medical insurance and other third-sector insurance programs. It has already been found that there were 60,000 cases of non-payments by Aioi Insurance Co., Ltd, and the number of the cases is expected to increase as further in-house investgation is conducted by the company.
Nipponkoa Insurance, Tokio Marine & Nichido Fire Insurance Also Failed to Pay
According to industry sources, it is expected that many cases of unpaid insurance by Nipponkoa Insurance Co., Ltd will be found. The sources say some similar cases are also certain to be uncovered at Tokio Marine & Nichido Fire Insurance Co., Ltd., the largest company in the industry which became the chair company of The General Insurance Association of Japan, replacing Mitsui Sumitomo Insurance Co., Ltd., which vacated the position due to a scandal.
Yamamoto: Non-payments Must be Completely Denounced
New Financial Services MinisterYamamoto, however, touched on the non-payments of insurance at the press conference on Sept. 26 and strongly criticized the management of the companies by saying, “Such non-payments run counter to the public sentiment and must be completely denounced.” This statement shook the insurance industry upside down. The Finance Services Agency is currently inspecting three foreign-invested life insurance companies, and it is scheduled to look into domestic nonlife insurance companies next. The companies concerned speculated at first that “the agency will only punish major nonlife insurance companies to show an example, and that’s the end of it. Unless serious cases of non-payment or evasion of inspection, coupled with the inspection by the agency, were found, there would be no punishment.” But now they tremble as they believe that “the companies would be subjected to punishment only if an increased number of non-payment cases were found.” Reports on failure to make payments are soon to be submitted to the Financial Services Agency. The inspection of Sumitomo Life Insurance Co. and The Dai-ichi Mutual Life Insurance Co. was concluded in July, but the results are yet to be assessed. There is the stronger possibility of the Financial Services Agency tightening the control over the insurance business.