• SHARE

Six major domestic nonlife insurers on Wednesday reported mixed financial results for the business year to March 31 as earnings were affected by revelations of an industrywide failure to pay legitimate claims and payouts for typhoon damage.

Mitsui Sumitomo Insurance Co. and Sonpo Japan Insurance Inc., which were ordered by the Financial Services Agency last year to partially suspend operations, saw earnings drop.

Mitsui Sumitomo said its net premium revenue, which corresponds to sales in other industries, dropped 1 percent from the previous year to 1.32 trillion yen, with net profit falling 14.6 percent year-on-year to 55.3 billion yen.

Mitsui Sumitomo said it probably lost about 35 billion yen in revenue from the suspension, which caused it to spend about 2.3 billion yen on advertising and letters of apology.

The insurer was forced to halt part of its operation between June and February for not paying legitimate claims in more than 45,000 cases.

Sonpo Japan’s net premium revenue dropped 0.6 percent from the previous year to 1.36 trillion yen. Net profit fell 29 percent from the previous year to 48.2 billion yen.

Sonpo Japan said that without the nonpayment incident, it would have posted 40 billion yen more in revenue. The insurer also paid 2.6 billion yen in the 2006 business year to customers who had not been paid for legitimate claims.

Figures for the two firms are parent-only.

Although other major nonlife insurers also received business improvement orders from the FSA last year for nonpayment on claims, no other firm had to suspend business.

This has caused differences in net premium revenue among the six major insurers.

Tokio Marine & Nichido Fire Insurance Co. saw a 1.9 percent increase in parent-only net premium revenue to 1.92 trillion yen in fiscal 2006, and Aioi Insurance Co.’s net premium revenue rose 2 percent year-on-year to 851.2 billion yen.

Nipponkoa Insurance Co. was the only insurer of the four to see its net premium revenue drop — down 0.7 percent to 703.3 billion yen.

The nonpayment scandal forced all six firms to spend more to to upgrade their computer systems and have more people working on claims. This spending will continue for the current business year.

“In management’s view, it is important to slash costs. But to improve our operation and service quality, we have to make an intensive investment,” Katsuaki Ikeda, managing executive officer at Mitsui Sumitomo, told a news conference.

In addition, payments for damage caused by natural disasters rose by billions of yen in fiscal 2006, most of which came from typhoon-related claims.

Typhoon No. 13, which hit the Kyushu and Shikoku regions in September, is estimated to have caused 20 nonlife insurance firms a combined 122 billion yen in claims, according to the General Insurance Association.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW