JAPAN Law and Practice Contributed by: Hironori Nishikino and Koji Kanazawa, Chuo Sogo LPC
istered but also, similarly to officers and employees of below-mentioned non-life insurance agencies, without any obligation to give notice thereof. In many cases, employees of a non-life insurance company engage in “non-face-to-face” offerings of their products (by such means as telephone, mail or internet) and tend to transfer business oppor- tunities with large-scale companies to their head office for handling. • Registered non-life insurance agencies, their officers (with the exception of auditors) and their employees may engage in “insurance solicitation”. While officers or employees of non-life insurance agencies are not required to be registered, they are required to provide notice of their involvement. The majority of non-life insurance sales are made by agencies, accounting for 89.7% of total sales on a direct-net-premiums-written basis, while sales by (i) officers and employees of insurance companies (through their direct sales) and (ii) insurance brokers account for only around 9.4% and 0.9% respectively. Of all non-life insurance agencies, dedicated insur- ance agencies account for 17% (based on the number of entities involved). The remaining agencies operate as a side business alongside other businesses, includ- ing entities in the automobile industry (dealers and repair shops), accounting for 56%, and the real estate industry, accounting for 9%. Insurance Brokers Registered insurance brokers may also engage in “insurance solicitation” that is limited to mediating conclusions of insurance contracts. The Insurance Business Act has assigned special duties to these insurance brokers, including: • the duty to deposit a security guarantee (JPY20 million at the time of commencement of their business, which can be exchanged for an insur- ance broker’s liability insurance policy; under the amendment to the Insurance Business Act, this amount is scheduled to be reduced to JPY10 mil- lion); • the duty to disclose fees and commissions; • the duty to prepare bought and sold notes;
• the duty of loyalty (the duty to provide “best advice”); and • other special duties that have not been imposed on other insurance agents. There are only 66 insurance brokers in Japan. While most of them focus on large-scale corporate clients, handling insurance products for individual clients is extremely rare. Following the amendment to the Insur- ance Business Act, measures are expected to be introduced to promote the use of insurance brokers, including allowing them to receive intermediary com- missions for corporate insurance contracts (including those entered into by sole proprietors) not only from insurance companies – currently the only permitted source under the existing framework ‒ but also from customers. Sales Through Banking Channels Insurance sales through banking channels in Japan commenced in 2001 but the number of products they could sell was severely restricted. The range of insur- ance products available for sale by banks has since expanded multiple times, and the restrictions were completely removed in 2007. Banks function as insurance agents in the selling pro- cess. In this respect, it is worth mentioning that addi- tional special regulations have been applied to banks in order to avoid circumstances of insufficient con- sumer protection, which could result from improper use of the banks’ information-gathering ability in rela- tion to customers’ funds or their improper influence over customers. Strict regulations have been imposed on banks, including measures/regulations for the protection of non-public information (pursuant to which customer information obtained through their banking business cannot be used in connection with insurance solicita- tion without customers’ consent) and regulations con- cerning soliciting of borrowers (where certain types of insurance products cannot be sold to customers who are granted business loans). While these additional regulations have been imposed for the protection of consumers, they essentially function to protect the traditional channels of insurance distribution.
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