The Financial Services Agency called on all 86 insurance firms in the nation Friday to check their sales material on savings-type insurance products after it discovered some firms had not been clearly explaining their policies.
If the FSA has strong suspicions that one or more companies are doing something illegal, it has the power, under the Insurance Business Law, to order all firms to investigate whether they have done the same.
In the case of the sales material, however, the 48 nonlife insurance companies and 38 life insurers were only asked to submit results of their internal investigations to the financial watchdog in one month.
The call comes after Aioi Insurance Co. Sompo Japan Insurance Inc., Mitsui Sumitomo Insurance Co. and Kyoei Fire & Marine Insurance Co. recently came forward in succession to reveal their brochures had not clearly explained that the money paid out on policies at maturity might not be at the rate of interest at the time the contracts were signed.
The policies most affected are those sold around the time of the bubble economy, in the late 1980s and early 1990s.
Financial Services Minister Kaoru Yosano indicated during a news conference after Friday morning’s Cabinet meeting that authorities suspect it is an industrywide problem.
“Although the cases came to light individually, when we looked into it, it appeared that it might be something affecting other firms,” Yosano said.
Due to the fall in interest rates after the bubble’s collapse, the payouts to policyholders who bought during the bubble have been far less than what they expected when they signed up.
In the case of the four insurance companies that have come forward, they all had clear disclaimers in their policy contracts, but their promotional material did not fully disclose the possibility of lower returns. Agency officials said consumers generally look at the brochures, not the contracts, when deciding whether to purchase a policy.
The FSA has asked the insurers to report whether all their brochures, both past and present, clearly explain the possibility of receiving lower returns than what is projected at the time the contract is signed due to interest-rate fluctuations, agency officials said.
The insurers are also being asked to check if they had proper legal screening done before publishing their sales material, the officials said.
The FSA has the power to require any company to report on its practices if it suspects an improper practice at one company might be a structural problem involving the entire industry.
If the agency believes there is a high probability a company practice is illegal, under the Insurance Business Law, it has the right to order firms to report to it, and can punish companies that hand in false information.