Chairman's Statement (Translation)
released on June 15, 2006（July 26, 2006）
1. The Environment and Trends in the General Insurance Business during the Year
Japan's economy leveled off and then continued steadily climbing, reflecting the high corporate profits and active consumer spending during the year. Reflecting this economic recovery as regards monetary policy, the ban on the quantitative easing policy was lifted which was an epoch-making event. In the field of financial administration, the Program for Further Financial Reform has made progress and Japan's economy has recovered from the difficulties caused by the bursting of the so-called "Bubble Economy" both in name and reality, and has moved into a new phase.
With regard to the business results of our member companies (consisting results of nine listed companies), the amount of net premiums written has gone up due to end of decrease in the premiums per policy in automobile insurance, increase in the number of new houses being built and Earthquake Insurance policy, etc. Consequently, net profit for fiscal year 2005 was 306.3 billion yen, an increase of 17.8% which amounts to 46.2 billion yen, thanks also to a decrease in net claims paid for damage caused by natural disasters and a good investment market environment.
At the same time, some insurance claims payment failures and improper explanations on sales brochures were revealed in our member companies and have caused serious inconveniences to our customers involved. Since this problem came to light, our member companies have faithfully taken preventive measures so as these mistakes will not be repeated. The GIAJ has continued to strengthen its efforts to restore the public's trust by urging member companies to pay claims properly and to provide appropriate information to customers at the time of insurance sales and solicitation.
2. Specific Actions during the Year
Under the catchphrase "The General Insurance Industry Supports You, Your Community and Society", we have carried out various activities focusing on the following four core missions, "Further Enhancement of Consumer Services", "Carrying out Social Responsibility", "Contribution to the Global Community" and "Making Requests and Proposals" by linking them with each other. Major activities are listed below.
(1) Further Enhancement of Consumer Services
To enhance understanding of general insurance, we published the "General Insurance Buyers' Guide" and brochures (which are an abridged edition of the Guide). We distributed them to consumer policy agencies and consumer affairs centers throughout the country. They are also available on our Web site.
In addition to the above, we have tried to improve our consumer services by publishing the "Guideline for Policy Summary and Attention-calling Information" for our member companies to use when they provide consumers with appropriate information at the time of insurance sales and solicitation; by giving feedback to member companies on complaints filed to the GIAJ's counseling offices; by setting rules on calling attention to and giving ameliorative advice to the management of member companies when the GIAJ finds any particular trends in complaints data; and by an increase in our ability to respond to consultation issues and complaints.
Regarding the regulation on Small-amount Short-term Insurance Providers, which became effective from April 1, 2006, we have tried to put ourselves in the consumers' position and have requested that proper consumer protection should be guaranteed. Currently, cooperating with the Life Insurance Association, we have been discussing details of the agent qualification examination for Small-amount Short-term Insurance Providers in order to establish a reliable distribution framework and to enhance the capabilities of agents and solicitors.
The revised Safety Net System, effective from April 2006, was redesigned to be consistent with the characteristics of general insurance policies, for example by assuring 100% of claims payment for accidents occurred within 3 months after an insurance company has become insolvent.
(2) Carrying out Social Responsibilities
The GIAJ has been taking an active role in automobile theft prevention activities which include a secretariat of the private sector in the " Government, Private Sector Joint Automobile Theft Prevention Project Team" launched in September 2001, and distribution of automobile anti-theft brochures on the streets by employees of the general insurance industry all over the nation on October 7th, Theft Prevention Day, which started in 2003.
Last year, the GIAJ strengthened its activities by setting October as the "Month for Automobile Theft Kickout" and held an exhibition on anti-theft devices, inviting the Chief of the National Public Safety Commission, and holding symposiums on theft prevention and other related events across the country. In addition to the activities listed above, there has been a significant improvement in many areas such as the abolition of special treatment of used cars as personal baggage at customs clearance, an increase in the crime-arrest ratio by the police, and the dissemination of immobilizers and so on. As a result, according to the National Police Agency, the number of automobile thefts was dropped to 46,728 in 2005; this was the first time the number of auto thefts has been lower than 50,000 since in year 2000 when auto thefts suddenly soared.
Distressful events and crimes involving children are repeatedly reported. Since 2003, the GIAJ has promoted "The National Local Community Crime Prevention Activity Award" which commends anti-crime volunteer groups in communities and the "Exploration for Disaster Prevention" program for elementary students. These activities help in raising awareness of disaster and crime prevention and also help in encouraging the communication between adults and children in communities that recently has been decreasing. Taking part in these activities, I have been made keenly aware of their social significance.
On June 8, as awareness of and interest in disaster prevention is growing internationally, the "Exploration for Disaster Prevention" program won the Excellency Award of the Commendation for Consumer Education Materials given by the National Institute on Consumer Education (NICE). The program has been gradually disseminated overseas as well. The Program was introduced on the Web site of UNESCO and was actually carried out in Phuket, the place which had been devastated by the Sumatran Earthquake in 2004.
This program was also broadcasted by the Japanese government on its Internet program called the "Disaster Prevention Channel" and an article on the program will be carried in the Disaster Prevention White Paper for Fiscal 2006 edition.
(3) Contribution to the Global Community
The GIAJ has been expressing its views and opinions to the international community by participating in the meetings of the International Association of Insurance Supervisors (IAIS) as an observer, and joining as a member of the delegation from the Nippon Keidanren (Japan Business Federation) for the 6th WTO Ministerial Conference which was held in Hong Kong last December, etc.
In April, the GIAJ issued a statement to express support for the introduction of "The National Insurance Act (NIA) of 2006" to improve the regulation of insurance in the United States and distributed it to the relevant parties and organizations. I believe that this statement effectively expressed our position and consequently related articles were carried in an American financial paper and trade papers in the United States and Europe. I hope active discussions will start in the U.S. Congress.
As one of the leading insurance countries in Asia, in addition to the ISJ Overseas Seminar in Viet Nam, we provided lectures to delegates from the DOI of Thailand and the Russian Association of Motor Insurance, about the Japanese insurance market and the GIAJ's activities regarding loss control in automobile insurance.
(4) Making Requests and Proposals
For the development of the industry, the GIAJ has actively lobbied the relevant organizations regarding regulatory reforms. With reference to matters related to the Program for Further Financial Reform, the Enforcement Regulations of the Insurance Business Law and the Comprehensive Supervisory Guidelines for Insurance Companies were partially revised in order to respond to the implementation of the "Financial Product Trading Law", to ensure flexibility in the calculation of the loading portion of premium rates and to establish rules for premium reserves in third sector products. We have expressed our opinions from the viewpoint of the maintenance of soundness and consistency in the current system in order to realize a financial system which gives satisfaction to users of financial services. We believe that our views have been given due consideration.
As a result of regulatory reform requests, insurers are now able to enter into the banking business as a bank agent and we are expecting new services will be provided.
Moreover, a tax reform bill has been passed by the Diet which will introduce deduction of premium for Earthquake Insurance from taxable income and going into effect in 2007. As of the end of December 2005, the number of contracts in force for Earthquake Insurance on Residential Risks exceeded 10 million. We believe that this creation of a new tax deduction system helps people who intend to take out Earthquake Insurance policies and also it is a tremendous achievement towards further dissemination of Earthquake Insurance policies.
I would like to express my sincere appreciation for kind support and cooperation from many people. Under the catchphrase "The General Insurance Industry Supports You, Your Community and Society", I have led various activities.
In particular, this year we encouraged greater connection and cooperation between the head office and local branch offices, which was one of my goals that I announced when I became chairman. I am confident that we carried out various activities that brought us closer to our customers in local communities.
Nevertheless, events transpired this year that made us recognize certain issues critical to the general insurance industry that enable it to perform its social mission. And the mission of the industry is to realize a safer and more secure society and corporate environment. Bearing these lessons in mind, the GIAJ, together with our member companies, continues to make efforts to restore the public's trust in the general insurance industry.
We look forward to your continuing support of and cooperation with our industry.