The Financial Services Agency on Tuesday ordered all 39 life insurance companies operating in Japan to investigate and report by the end of September whether they failed to make due payouts to policyholders over the past five years.

The news comes at a time when Meiji Yasuda Life Insurance Co., one of Japan’s top four life insurers, disclosed on two occasions over the last six months that it had unfairly withheld death benefits — news that stunned many insurance policyholders.

The industry has taken the position that the improper withholding of policy payouts was a problem unique to Meiji Yasuda. But analysts said the FSA’s investigation order could expose similar cases at other insurers.

“It is possible payment misdeeds might come to light at other companies,” said Tatsuo Kurogi, insurance analyst at Standard & Poor’s. “(That) could undermine public trust in private insurance firms.”

A flood of policy cancellations may ensue if similar cases are uncovered, throwing a wet blanket on the nascent recovery the industry has seen over the past two years, Kurogi said.

Cancellations had remained high for years due to widespread concerns over the financial health of insurers after some midsize ones failed in the late 1990s.

Services Minister Tatsuya Ito said insurers will be required to verify each case of nonpayment, assess whether it was appropriate and report to the FSA on what they intend to do about instances in which payouts should have been made.

The agency also told the 39 firms to reassess how they manage insurance payments.

Japan’s four top life insurers, including Meiji Yasuda, disclosed earlier this month they had refused to pay out insurance benefits in 3,468 cases in fiscal 2004, which ended last March 31. The other three are Nippon Life Insurance Co., Dai-ichi Mutual Life Insurance Co. and Sumitomo Life Insurance Co.

But insurers have claimed the problem of rejecting claims under shady circumstances was unique to Meiji Yasuda, whose salespeople had assured clients that even if they had a problematic illness in the past, they could still be eligible for benefits after a certain time. But the customers were later denied payouts.

“We do not acknowledge that payout misdeeds were an industrywide affair,” a spokesman at the Life Insurance Association of Japan said.

Insurers are currently urging salespeople to follow guidelines on prompting policyholders to report their medical history accurately to ensure payouts are not improperly withheld, industry sources said.

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