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Tuesday, July 1, 2008

Regaining trust key: insurance group chief


Staff writer

Nonlife insurers must do everything they can to regain the trust squandered by such industrywide missteps as failing to honor legitimate claims and overcharging on premiums, according to the new chairman of a nonlife insurers' industry group.

News photo
Words of insurance: Makoto Hyodo, who Monday became chairman of the General Insurance Association of Japan, is interviewed recently in Tokyo. SATOKO KAWASAKI PHOTO

"The foremost important point is to regain trust," said Makoto Hyodo, who was appointed Monday chairman of the General Insurance Association of Japan.

The first scandal broke in 2005. By the time the facts came to light, it was found that the six major nonlife insurers had failed to pay a combined ¥29.4 billion in insurance claims in 381,000 cases for the five years through June 2006.

In May, the six major insurers admitted overcharging clients ¥30 billion in insurance premiums.

"The reason behind this is because insurance companies expanded their businesses," said Hyodo, who is also president of Nipponkoa Insurance Co. "Employees and sales agency staff were insufficiently educated and trained."

In many cases, sales promoters and agency staff failed to explain the full extent of the insurance policies and thus clients often weren't aware of all the payouts they were entitled to.

In other cases, nonlife insurers weren't prepared to cope with the responsibilities that came with expanding into the medical insurance business.

To prevent a recurrence, the industry group has upgraded qualifying exams for insurance company employees and agency officials, Hyodo said.

Starting next April, sales promoters will be required to take an exam every five years to continue selling policies. Under the current system, no followup exams are required.

"We have renewed the system and increased human resources (to avoid a recurrence), but that is not the end of it," Hyodo said. "We need to improve the quality even more."

In addition to the challenges the industry has faced over the past few years, Hyodo himself, as Nipponkoa president, has been put to the test over the past few weeks by a foreign investment fund.

On June 9, U.S.-based Southeastern Asset Management Inc. said on its Web site it would oppose Hyodo's reappointment at the shareholders' meeting last Thursday, citing the company's poor performance in the past year since Hyodo took the post.

Although Hyodo got enough votes from other investors to stay in power, it was a trying time. Southeastern Asset has 18.28 percent of the Nipponkoa votes.

"I have done my best," Hyodo said in a recent interview. "But I can't help it if there is a difference of opinion between Japanese management and foreign investors."

Because 43 percent of Nipponkoa's shareholders are foreign investors, the company needs to listen to their voices, he said.

"And I can't introduce antitakeover measures because then other foreign investors may withdraw their funds from our company," said Hyodo, who took up the post in April 2007.



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