JAPAN Trends and Developments Contributed by: Kazuo Yoshida and Tomonori Ogawa, Mori Hamada
Amendments to the Insurance Business Act and JFSA’s Supervisory Guidelines Background – fraudulent insurance claims by large insurance agents, price cartel by major non-life insurers, and information leak by major life and non-life insurers In 2025, Japan’s Diet passed the Insurance Busi- ness Act amendment bill in May and promulgated it in June. This amendment is scheduled to be enacted next spring. In parallel with this, the JFSA is revising its Guidelines. The amendments were triggered by three major inci- dents in the insurance industry in Japan. One inci- dent involved an insurance fraud committed by a large insurance agent which was also a major used car sales dealer. According to news reports, the agent deliberately damaged vehicles that customers had brought in for repair and charged non-life insur- ance companies an inflated amount for the repair. The JFSA found that insurance companies did not pro- vide appropriate education, monitoring or guidance to some large insurance agents. This was primarily because the agents brought them substantial profits, and the insurers were concerned that a deterioration in their relations with those insurance agents may negatively impact their business. Another incident involved a price cartel among major non-life insurers. During the process of arranging coinsurance, the major non-life insurance companies were widely engaged in activities that may have vio- lated antitrust regulations, such as making preliminary adjustments to insurance premiums before bidding. The cartel behaviour arose from insufficient knowl- edge of antitrust regulations among non-life insurance companies and insurance agencies, and the strong pressure on non-life insurance company sales rep- resentatives due to rising fire insurance premiums. Another contributing cause was the fact that the lead insurer and the allotment of coinsurance shares were decided by factors other than insurance, such as cross-shareholdings and favours to insurance agents. As for the third incident, two types of data leak inci- dents were identified shortly after the two incidents mentioned above. The first is referred to as the “agen- cy case.” This involved insurance agencies handling
insurance products from multiple insurers. When sending customer information via email to instruct oth- er insurers on handling matters like policy renewals, agencies inadvertently included customer information belonging to other insurers in the same email, giving the recipient access to the customer information from other companies. The second is the “secondment case.” Employees seconded by insurance companies to insurance agencies sent customer information and internal data (such as performance evaluation criteria for insurance sales at bank counters and information on product revisions by other companies) to their insurance company. The JFSA concluded that insur- ance company management failed to establish appro- priate systems to manage risks associated with their business model ‒ which positions insurance agencies handling insurance products of multiple insurers as a key pillar of insurance sales ‒ and with their manage- ment strategy of strengthening relationships with such insurance agencies through employee secondments. Overview of the amendments to the Insurance Business Act • Strengthening regulation of large insurance agents: the amendment intends to strengthen the regula- tion of large insurance agents. Specifically, such agents will be required to appoint compliance officers, and to establish a complaint-handling system. In addition, it became apparent that large insurance agents that concurrently operate busi- nesses that profit from receiving payments for repairs and other expenses from insurance claims, such as the automobile repair business, have an incentive to make fraudulent claims, for example for repair costs, in order to benefit themselves. This was seen in the major used car sales dealer case. Thus, the amendment requires the establishment of a system to manage conflicts of interest for insur- ance agents. • Ensuring the effectiveness of monitoring systems of insurance companies: one factor thought to have given rise to the fraudulent insurance claim case is insufficient education, monitoring or guid- ance by insurance companies over large insurance agents. In view of this, under the amendment, insurance companies must implement an effec- tive system to monitor insurance agents, includ- ing appropriate separation between the insurance
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