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Friday, July 4, 2008
FSA slaps 10 insurers over 'nonpayments'
The Financial Services Agency slapped 10 life insurers, including two foreign ones, with business improvement orders Thursday saying their internal controls are insufficient to prevent them from failing to pay benefits to policyholders.
The move is the FSA's latest attempt to remind the major life insurers that they are being monitored and to pressure them to improve internal supervision so the nonpayment scandal of 2005 does not recur.
The 10 insurers failed to pay ¥79.1 billion in benefits owed to policyholders in 993,375 cases between fiscal 2001 and 2005, the FSA said.
The insurers are required to submit their improvement plans by Aug. 1. "The companies failed to pay a large amount of benefits in a large number of cases and the damage to the clients is huge," an FSA official said. Their responsibility is especially heavy because they are the leading insurers, the official said.
It has been three years since the scandal broke, and the life insurers still have not verified whether the measures they have taken would actually work, the official said, adding that the FSA felt the need to facilitate that process.
"It is doubtful whether they have checked that there are no nonpayment cases for fiscal 2006 and 2007," the official said.
The eight Japanese companies are Nippon Life Insurance Co., Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co., Sumitomo Life Insurance Co., Daido Life Insurance Co., Fukoku Mutual Life Insurance Co., Mitsui Life Insurance Co. and Asahi Mutual Life Insurance Co.
The two foreign insurers are American Family Life Assurance Co. and American International Group Inc.
The "nonpayments" occurred because the life insurers failed to properly examine their policyholders' medical treatment records or because they failed to inform them that additional claims could be made on the options in their contracts, the FSA said.
In some cases, the insurers also failed to pay refunds on expired policies, the FSA said.
The life insurers issued separate statements apologizing for the nonpayments and vowing to do their best to improve their internal checks.
"We have been taking various measures to prevent a recurrence," American Family said in a statement. "But we will gravely accept the punishment and continue to make our best effort to take thorough steps to ensure that it will never happen again."
According to reports from 37 life insurers as of the end of March, a total of ¥97.3 billion in benefits were not paid out in the five years to fiscal 2005. About 94 percent of the total has already been paid since.
The nonpayment scandal broke in 2005, when it was revealed that Meiji Yasuda had failed to make payments in 162 cases. Soon afterward, similar problems were reported by other insurers.
After more than three years, the nonpayment issue continues to haunt the life insurers, which are already suffering from plunging sales as the nation's birthrate falls.