Business / Financial Markets

Japan Post units may be ordered to suspend some operations due to dodgy insurance sales

Kyodo, JIJI

The Financial Services Agency is considering ordering two subsidiaries of Japan Post Holdings Co. to halt a portion of their operations for inappropriate insurance policy sales, according to sources close to the matter.

The agency may order Japan Post Insurance Co. and Japan Post Co. to halt sales and some other operations as early as Dec. 27 after an on-site investigation lasting three months found cases violating the insurance business law, such as unnecessary overlapping periods in contracts during policy switch-overs.

It would be the first time for the two Japan Post Holdings units to receive such administrative punishment from the FSA. The agency will decide how long insurance sales operations should remain halted, the sources said.

Given that irregularities have spread nationwide, the agency sees the need to keep their Kampo insurance sales halted in order to prevent any recurrence of similar problems and improve their internal control systems, informed sources said.

The insurance and mail delivery units, which postponed the restart of suspended insurance sales from October to January, will have to push back the schedule further.

The orders will only cover insurance sales, while postal, deposit and other services will be excluded, according to the sources.

An internal probe by parent Japan Post Holdings has found 48 cases of insurance products sales that violate the law, such as providing false explanations to customers. It also discovered a further 622 cases of improper sales that breached in-house rules, including signing contracts with elderly customers with no family members present, people close to the matter said. The probe is still underway.

The agency told the two companies that many violations of the insurance business law have been confirmed and requested them to report measures to improve their operations.

Reflecting the low sense of governance by Japan Post Holdings, the agency is expected to slap a business improvement order on it as well, the sources said.

Many group officials expected that the FSA would not issue a business improvement order to an entity like their group, which is engaged in a universal service.

But the agency sees the sales irregularities as “highly malicious,” a source said.

Japan Post Holdings Chief Executive Masatsugu Nagato and the top executives of Japan Post Insurance and Japan Post will reportedly hold a news conference Wednesday to release a final report of the investigation.

Japan Post Holdings, privatized in 2007 when it was 57 percent owned by the government and local public entities, has admitted sales quotas may have prompted the improper selling. The group sold the insurance products at over 20,000 post offices nationwide.

Due to the voluntary sales suspension that started in mid-July, new insurance contracts concluded between April and September at Japan Post Insurance numbered only 580,000, down by 300,000 from the year before. If the sales resumption is delayed further, the company’s earnings are likely to be affected.