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Insurance

FSA weighs ordering Japan Post to suspend insurance sales

Formerly government-run companies suspected of more than 10,000 violations

Japan's Financial Services Agency is expected to order two subsidiaries of Japan Post Holdings to halt sales of insurance policies. (Photo by Yoichi Iwata)

TOKYO -- Japan's Financial Services Agency is considering ordering Japan Post Insurance and Japan Post Co., the country's mail delivery service, to temporarily halt sales of insurance products after inappropriate practices came to light at the formerly government-run companies.

The financial watchdog found many legal violations, including double charging of insurance premiums. The regulator intends to hold the Japan Post group accountable after the group found more than 10,000 cases of legal or internal company violations.

The agency plans to finalize details of its sanctions by the end of the year. The suspension order is expected to apply to areas related to the sale of dubious insurance policies. Other services, including mail delivery and banking, would not be affected.

The FSA plans to issue a business improvement order to the parent company, Japan Post Holdings, through which the agency will demand fundamental improvements to prevent a recurrence of similar practices.

The Ministry of Internal Affairs and Communications also plans to issue business improvement orders to Japan Post Holdings and Japan Post.

The Financial Services Agency in the spring ordered the group to investigate possible instances of dishonest sales practices at Japan Post Insurance.

In July, Japan Post Insurance and Japan Post suspended some services after the misconduct came to light. They had intended to restart their insurance operations in January next year. But if the FSA issues a business improvement order, there will be a delay. The agency plans to determine the length of the suspension after assessing the degree of maliciousness in the violations and the steps the companies take to prevent further violations.

The Japan Post group intends to announce the results of its investigation on Wednesday. The probe found more than 10,000 instances of policy sales that violated laws or internal rules. That is significantly higher than the 6,327 cases found in the interim report released at the end of September.

The agency also found that dysfunctional corporate governance failed to keep corporate malfeasance from spiraling out of control, and that this was a major contributor to the problem.

In the September report, the Japan Post group’s special investigative committee said the use of unbalanced sales goals and evaluation systems put undue pressure on sales representatives. The agency is believed to have focused its investigation on this point.

Nikkei staff writers Tomohiro Ebuchi and Mari Ishibashi contributed to this report.

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