The Financial Services Agency plans to order Meiji Yasuda Life Insurance Co. later this month to suspend part of its business activities for about two weeks over alleged illegal sales practices, FSA sources said Friday.
Meiji Yasuda has admitted to having problems with its contracts and has apologized to policyholders.
The administrative order is expected to ban the insurer from signing new individual life insurance contracts at all its branches, the sources at the financial regulator said.
The firm will be allowed to conduct other business, such as paying benefits.
It is rare for the FSA to issue a business suspension order covering all branches for that length of time.
The FSA made the decision after it received a large number of complaints from policyholders about inconsistent company standards.
“We deeply apologize to policyholders and other people concerned over the tremendous trouble they went through,” Meiji Yasuda President Ryotaro Kaneko told a news conference.
Kaneko also said he intends to take disciplinary action against himself and the workers involved in the illegal sales practices.
The sources said that Meiji Yasuda salespeople signed life insurance contracts with individuals despite knowing they had health problems.
Although pre-existing health problems are usually a problem for life insurance companies, Meiji Yasuda salespeople told clients that the company rules stated the firm could not annul contracts after two years, the sources said.
But the firm did cancel their policies and refuse to pay those who filed for benefits, saying they had committed fraud by failing to notify the firm about their health problems prior to signing their contracts or by not providing medical records, the sources said.
From April 1999 to the end of September 2004 there were 162 cases worth about 1.5 billion yen in benefits that the company failed to pay, according to Meiji Yasuda.
The insurer said it would begin paying benefits to policyholders on Monday.
The FSA has also said the insurance company suffers from bad management and plans to issue a business improvement order to have Meiji Yasuda thoroughly review its governing structure and prevent a recurrence of similar illegal behavior, the sources said.
Meiji Yasuda Life was created through a merger of Meiji Life Insurance Co. and Yasuda Mutual Life Insurance Co. in January 2004.
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