Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

September 29, 2006

Q.

This question relates to the non-payment of insurance claims, which must be utterly denounced according to your statement at your first press conference. The Financial Services Agency (FSA) is currently instructing non-life insurance companies to report the state of non-payment of insurance claims, especially in regards to optional extras of automobile insurance. Their reports are due to be filed at the end of this month, but it seems certain that they will again report a large number of new non-payment cases. Last year, the FSA instructed non-life insurance companies to file a report, and they did so, but they were later found to have failed to make payments in a series of cases--what is your impression of this situation? Also, what are the causes of this situation, and what is FSA's policy to deal with it?

A.

I am aware of press reports about it. Non-life insurance companies have been instructed to submit a report by today about the results of the reinvestigation into the non-payment of insurance claims conducted by them according to their respective business improvement plans. Therefore, the formal reports are yet to be made. If additional non-payments are identified, we will scrutinize and check the content of the reports, examine the governance framework, payment management framework and other such frameworks in detail, and properly deal with the situation, including taking administrative action, depending not only on how many non-payment cases there are but also on the nature of the facts.

In regards to the question of what causes such non-payments, we hope to find an answer by conducting further studies. Generally speaking, optional extras are becoming increasingly complicated and sophisticated year by year, and some non-payments are not necessarily intentional. Also, there are problems concerning governability such as in recent mergers at the corporate management level and in terms of whether or not the top management's efforts are strictly reflected at the bottom of the organization. Looking at it from an alternative angle, there are such present-day factors as the relationship between mass consumers and big companies that sell complex products, and defects that cannot be easily found by consumers as exemplified by the problem regarding the heater manufactured by Matsushita Electric Industrial Co., Ltd. at the end of last year. Including those just mentioned, buying and selling of products take place while there is a large discrepancy in the relationship between the parties to the contract in terms of power, so both buyers and sellers need to exercise due caution in this area in the future. The credibility of the financial market and the insurance sector is at stake unless consideration is given from the consumers' point of view to the greatest extent possible, so in that sense, we intend to pay close attention from now on.

Q.

You just stated that there might be non-payments that are not necessarily intentional--do you think that unintentional non-payments are acceptable and intentional non-payments are more malicious, considering that the payment of insurance claims is a fundamental task for insurance companies?

A.

As to whether it is intentional or not, the burden of proof probably lies with the insurance company. As I just stated, in general terms and in the present-day context, the burden of proof should lie with the company in cases where a consumer incurred some kind of damage, even if it was unintentional, in view of products that cannot easily be determined by consumers due to their increasing complexity.

Q.

You have consistently mentioned customer protection, but it is difficult for the government to determine what an easy-to-understand product is from the standpoint of customer protection, considering that there are many cases in which customers purchase products without reading the terms and conditions. What are your thoughts on this matter?

A.

Nowadays, trading of financial instruments involves ticking a checkbox to confirm that an explanation about a certain matter has been provided or received, showing that companies are devising trading methods to prevent disputes from arising afterwards. As trading is evolving in that sense, we hope that financial instruments, especially insurance products, will follow suit.

(End)

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