EDITORIAL: Insurance arm of Japan Post group betrayed the public’s trust

Japan Post Insurance Co. has betrayed the trust of customers with dubious sales practices. The company should take this deep-rooted scandal seriously.

Inappropriate sales practices have been rampant within the company, the life insurance unit of the Japan Post group.

We urge the company to conduct an all-out investigation to expose the extent of the scandal and publish the findings. The Japan Post group should act swiftly to review its management of both the insurance unit and the group as a whole.

The insurer uncovered about 24,000 cases of questionable handling of insurance policies over the past five years. Common examples include cases in which customers who were persuaded to cancel contracts to switch to new policies were not allowed to enter new contracts on grounds of illness they developed after buying the old policies. Others concern nonpayments of insurance money due.

In addition, there were 22,000 cases in which customers were forced to make double premium payments for both new and terminated contracts over a period of slightly less than three years. The findings indicate that inappropriate practices are endemic among the sales squad.

The root cause of the scandal seems to be the company’s unrealistic sales targets that are out of tune with the reality of the front line of sales. To achieve the goals, the company set up unreasonably tough sales quotas and performance-based incentives for its sales staff.

Any approach aimed at bolstering sales of financial products at the expense of customers is totally unacceptable.

Japan Post Co., the postal services arm of the group, which is owned by Japan Post Holdings Co., has been selling policies on behalf of the insurance unit. Japan Post has a huge customer base, especially among elderly Japanese, a legacy of its past as a state-owned company that commanded strong public confidence.

The company has blatantly betrayed the people’s confidence.

At a July 10 news conference, the presidents of Japan Post Insurance and Japan Post apologized for damaging the interests of customers and announced a set of measures to fix the problem. The measures include stopping sales people from encouraging customers to cancel contracts and switch to new policies, reconsidering sales targets and enhancing a system to monitor sales activities for any inappropriate acts.

The insurer says it will pay insurance benefits based on canceled policies to customers who have been denied new contracts and also refund overpaid premiums. All these steps represent inevitable responses to the revelations.

But the management teams of the companies should also be held accountable for the proliferation of dubious sales practices.

When the allegations first surfaced in late June, Japan Post Insurance denied that the practices were inappropriate, citing the fact that its customers had signed confirmation notes. The top executives of the company were clearly unaware of the seriousness of the problem, which affected a wide range of customers.

The firm has offered nothing more than ballpark figures concerning inappropriate sales practices.

The insurance firm has decided to refrain from any policy sales activities until the end of August and to set up a third-party investigative committee to look into the scandal. But there are a slew of related issues the panel must address.

It should first focus on revealing all the facts about inappropriate sales practices and identifying all the factors behind the scandal.

It also needs to scrutinize how the administrative department and the management team dealt with the problem.

Key questions that should be answered include why such inappropriate sales practices became so widespread and why no action was taken to rectify the problem. To what extent were the executives aware of what was going on at the front line of sales?

Another important question the independent panel should tackle through its probe is whether and how the top executives recognized the problem when Japan Post Insurance sold its shares to the public in April.

The scandal also concerns the relationship between Japan Post Insurance and Japan Post, which means it is a matter of concern for the Japan Post group as a whole.

But top executives of Japan Post Holdings were not present at the July 10 news conference.

The government plans to sell its shares in Japan Post Holdings to the public, possibly by the end of the year. The group should act on its responsibility to offer convincing accounts about what happened.

--The Asahi Shimbun, July 13