Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

April 13, 2007

Q.

Today, life and non-life insurance companies held press conferences on their failures to pay due insurance money and their business practice improvement plans. While years have passed since the revelation of the insurance nonpayment problem, we do not see any end to the problem. Would you speak anew about your future prospects and what insurance companies are now required to do?

A.

We have asked life insurance companies to submit reports by today about the number and value of additional insurance money payments required under contracts. I believe the authorities will screen and analyze reports received from these companies. Life insurance companies should specify the whole picture of their payment failures and take prompt, appropriate measures for customers. After that process, we believe, they should fully analyze causes of such failures and take effective measures for prevention of such failures.

Next are non-life insurance companies. To 10 non-life insurance companies that were found to have made inappropriate payment failures for tertiary insurance products, business practice improvement orders were issued on March 14. They are planned to submit their business practice improvement plans today. We expect that these business practice improvement plans will include reform of insurance soliciting practices at the entrance of their business process, enhanced management of insurance payments at the exit of the process, creation of management systems for horizontal control of divisions ranging from product development to insurance payments, disclosure of the number and outline of complaints, and other measures for protection of policyholders. At the same time, we believe, these companies will specify responsibilities for inappropriate practices. The Financial Services Agency would like to appropriately follow up implementation of these plans. We would like to remind both life and non-life insurance companies that appropriate insurance payments are their basic and most important duty for restoration of public confidence in insurance policies. We would like to have these companies continue appropriate business operations. We hope that the business practice improvement orders and plans provide an opportunity for the insurance industry to put forward its new business approach that clearly calls for the perspective of policyholder protection, as noted earlier. We hope that insurers enter a new stage.

Q.

During the substantial time that has passed since the revelation of the insurance nonpayment problems at life and non-life insurance companies, administrative actions against them have been taken in various forms. We feel that a consciousness gap between the FSA and the insurance industry has remained, as indicated by the industry's complaints against administrative actions. Do you feel anew that something like consciousness reform is necessary?

A.

Although people say there is some competition in the insurance industry, the industry had been protected under the so-called convoy system for a very long time. Present insurance company managers may have still been preoccupied with the past practices while failing to be sensitive to competition. Through such transition from protection to competition, insurance companies are now required to compete with each other and with foreign players. As you well know, changes have been naturally seen in the consciousness of young employees and in the business environment. Without the improvements that are now proposed, they may be shaken out. They should shift away from a consciousness that they are not wrong while others are wrong. Through serious efforts, they may find solutions. You pointed out that there has been some gap between the FSA and the industry. But the industry's sound tensions with the regulatory authorities and with other relevant parties, particularly policyholders, may contribute to development of the industry. The industry's tensions with the FSA are not so different from those seen in other areas in society. If anyone does a good thing, there may be no tension. Rather, the industry should have some tensions regarding competition. The time has come for the industry to enter a new stage. As I said earlier, the present situation is somewhat different from the past one. This is my perception.

Q.

Recently, an employee at Ashikaga Bank was found to have embezzled customers' deposits. How do you feel about such incident at a bank under state control?

A.

As far as being under state control, the bank should be stricter than others. Given a bank's public responsibilities, I believe, any bank employee should hold fast to compliance with laws and regulations and have high morals. Although the incident could be viewed as one of occasional scandals seen at financial institutions, we have been implementing routine supervision and inspection operations in a bid to avoid such incident. This kind of incident can lead to misunderstanding about serious bank employees. Since Ashikaga Bank has made more news than others, I hope the bank will take strict actions and promote sounder banking operations.

(End)