EDITORIAL: Insurance scandal

It has come to light that Japan's top life insurance companies, implicated some years ago in a scandal over unpaid benefits, have since been lobbying, wining and dining lawmakers and their aides and making political donations in order to sway the political community. There are suspicions that some of these activities were aimed at blunting the Diet probe into the scandal. We are appalled at the shamelessness of these companies.

The entire life insurance industry must reform its antediluvian ways at once and start focusing on healthy competition through improved services.

The scandal surfaced in February 2005, when Meiji Yasuda Life Insurance Co. was found to have withheld policy payouts to policyholders. The company claimed these policyholders had violated their contracts by failing to fully state their medical histories when purchasing policies.

However, the Financial Services Agency found that the insurer had illegally withheld payouts to bolster its profits, and slapped Meiji Yasuda with a business suspension order.

When it became apparent that such practices were rife, the FSA in 2007 invoked the insurance business act and ordered all life insurers to check their policy records from fiscal 2001 through 2005. This exercise revealed 1.35 million cases of unpaid benefits, worth 97.3 billion yen ($1.125 billion), among 37 insurers. In July 2008, the FSA ordered eight Japanese and two overseas-based life insurers to clean up their acts.

The industry used selfish reasoning in the cases of nonpayment. In cases where policyholders forgot to file claims, insurers maintained they were not obliged to pay, and that their nonpayment was perfectly legitimate.

Such attitudes conflicted sharply with the FSA's position, which was to protect the interests of policyholders. Ultimately, the insurers accepted the FSA's definition of "nonpayment," and this turned up an even higher number of nonpayment cases and payments withheld illegally.

The vigorous lobbying and wining and dining, which has now come to light, occurred as the insurers were battling the FSA.

Apparently, the insurers became especially aggressive when the FSA ordered the self-inspections, which continued until the agency meted out administrative discipline in 2008.

During that period, Japan's top four life insurance companies--Dai-ichi Life Insurance Co., which then led the Life Insurance Association of Japan; Nippon Life Insurance Co.; Sumitomo Life Insurance Co.; and Meiji Yasuda--wined and dined and made political contributions not only to Liberal Democratic Party lawmakers, but also to those of the then-opposition Democratic Party of Japan. The companies are also suspected of having sought the intervention of certain lawmakers to escape disciplinary measures or be spared harsh questioning in the Diet under oath.

Bound by myriad rules and licensing regulations, the financial industry has traditionally protected its interests by lavishly entertaining members of the political and bureaucratic communities and effectively making political donations. When two senior Finance Ministry officials were arrested in 1998 for allegedly accepting bribes, the case revealed the extraordinary lengths to which the banking industry had gone to wine and dine influential bureaucrats.

The life insurance industry is apparently no different, but at least it evaded criticism until now. That may well have contributed to the perpetuation of its unethical practices. So long as the industry's basic nature remains unchanged, people will naturally question the Life Insurance Association of Japan's reason for existence.

The political community, too, is now under a cloud of suspicion. Did the lawmakers entertained by the industry pull their punches during question time in the Diet or influence the management of committee procedures? A senior vice minister of finance is among DPJ lawmakers linked to the scandal. Both the LDP and the DPJ owe the public an explanation. The Diet must get to the bottom of the scandal.

--The Asahi Shimbun, July 21