Japan's Insurance Industry Faces Scrutiny Over Failure to Pay Claims

The Financial Services Agency has issued business improvement orders to 26 nonlife insurance companies in Japan after identifying over 180,000 cases of failed claim payments totaling 8.4 billion yen over the past three years. These failures were primarily due to structural inadequacies in product explanation, marketing, and internal control practices, particularly in riders on auto insurance policies. The insurers had paid the main portions of insurance claims, but failed to make payments for costs covered by the riders, with many policyholders unaware of the potential for such payments. The FSA believes that these claim nonpayments were not isolated errors, but rather a result of systemic problems in product development and claim payments.

Key Takeaways:

• 26 nonlife insurance companies received business improvement orders from the Financial Services Agency for failing to pay over 180,000 claims, totaling 8.4 billion yen over three years.
• Failures were primarily due to structural inadequacies in product explanation, marketing, and internal control practices, particularly in riders on auto insurance policies.
• 86% of claim nonpayments involved auto insurance policies, with nonpayments averaging 46,000 yen per case.
• Insurers failed to pay for costs covered by riders in 37% of cases, citing lack of claims filing by policyholders.
• Claim payments offices at insurance companies were often unaware of riders on policies, failing to notify policyholders of available payments.
• FSA calls for insurers to revamp oversight structures, improve product explanations, and implement measures to prevent claim nonpayments.
• Firms such as Millea Holdings, Mitsui Sumitomo Insurance, and Axa Non-Life Insurance Co. were subject to improvement orders.

Statistics:

• 180,000+ claim nonpayment cases over three years.
• 8.4 billion yen in failed claim payments.
• 26 non-life insurance companies received business improvement orders.
• 86% of claim nonpayments involved auto insurance policies.
• 46,000 yen average nonpayment per case.
• 37% of cases involved failure to pay 10,000-20,000 yen for costs covered by riders.
• 22% of cases involved failure to pay for alternative means of transportation.

Sources:

• Tokyo, Nov 28 Asia Pulse
• (Nikkei) 28-11 1638