GIAJ Chairman's Statement(Translation)
released on December 20, 2007 （Dec. 20, 2007）
Japan's economic recovery remains on track with a strong business sector supporting overall growth, and this is expected to provide grounds for gradual but sustained economic expansion. Having said that, we will still need cautiously to monitor volatile movements in international capital markets (in connection with the subprime mortgage crisis) and rising energy prices.
According to the September 2007 half-year closings released by general insurers last month, despite improved returns on investment (due to increase in dividends etc. reflecting the overall solid performance of the domestic corporate sector), a slow down in automobile sales and housing constructions led to a reduction of premium income. We also expect member companies to be running higher business costs due to the ongoing reconstruction of their corporate infrastructure aimed at improving business processes and preventing structural errors (such as inadvertent non-payment of claims, miscalculations of premiums etc.) from ever reoccurring, so it is expected that we will be doing business in a difficult environment for a while.
However, we would stress that such ongoing measures are absolutely crucial for us to restore consumer confidence and improve our business quality. This remains our highest priority. These actions are also necessary for our industry to further advance in the future. Together with our member companies, we will continue to work hard to achieve our goals.
Also, I wish to report that it was resolved in our Board of Directors Meeting today that each member company will comprehensively review the contents-making and checking process of their solicitation materials (i.e. sales pamphlets and documents of a similar nature) to ensure that product information is adequately, properly and fully reflected. This is in compliance with the FSA's recent request. Furthermore, in connection with this matter, we have also agreed to renew our "Ethical Standards for Advertising", and "Guideline for Description of Solicitation Materials, etc." Through such measures, we will ensure sufficient indicative information is provided by insurers to allow consumers to have a full understanding of the product.
Key Measures and Actions
1. Measures aimed to restore consumer confidence in our industry
(1) Measures and Actions supporting GIAJ member companies
(i) Establishing a PDCA (Plan, Do, Check, Action) cycle based on consumer feedback
Following the recommendation made by the "Advisory Panel to Listen to Consumer Voices", we have established a PDCA cycle system aimed at improving business quality that works off consumer feedback (such as requests and suggestions made/collected by consumer-related government agencies) in order to review/revise our existing Guidelines more effectively. Based on opinions and comments we received during the first half of this fiscal year under this new scheme, we have decided to revise two publications, namely the "Guideline for Description of Solicitation Materials, etc." and the "Compliance Guide for Solicitation." We will continue to strive to restore consumer confidence and raise the level of quality of our business by reflecting consumer feedback better in our business practices.
(ii) Improving the quality of agents/solicitors
(a) Introducing an industry-wide specialized examination on insurance products
Based on opinions voiced at the "Advisory Panel to Listen to Consumers' Voices", we are currently considering introducing an industry-wide specialized examination on insurance products. We plan to have a blueprint ready by the end of this fiscal year. Helping agents/solicitors deepen their knowledge of insurance products will certainly help prevent incidents such as the miscalculation of premiums from reoccurring.
(b) Introducing a renewal system for agent/solicitor credentials In order to ensure that a minimum and acceptable level of quality is maintained among all general insurance agents/solicitors, we will introduce a system that will require all agents/solicitors in principle to retake their qualification examination every five years to renew their credentials. This will allow them periodically to check and brush up their skills.
(c) Raising the level of agent/solicitor qualification examination As I have previously reported, starting this October, we have made improvements to the qualification examinations for agents/solicitors by expanding the scope of the test, using a wider variety of questions, shortening the examination time, and making the questions harder. We have held the examinations three times since October, and compared to previous settings, the percentage of examinees that have passed the test has declined by approximately 10 percentage points. We will continue to fine-tune our examinations in a way that contributes to improving the quality of agents/solicitors.
(iii) Making our products (and policy wording) more consumer-friendly
A project team consisting of member companies as well as the group of experts comprising the "Study Group on Insurance Policy Wording" are discussing ways to make our products (and policy wording) more consumer-friendly. We are aiming to make our wording easier to read and understand while also keeping them legally robust (consistent with judicial precedents). We plan to prepare and release a "Guideline on Making Policy Wording more consumer-friendly" within this fiscal year. In addition, we are planning to review and change some of our insurance-specific terminology and make it easier to understand
(2) Measures and Actions to be taken by the GIAJ
(i) Promoting consumer understanding (including consumer education, information dissemination etc.)
Based on opinions voiced at the "Advisory Panel to Listen to Consumers' Voices" this month, we have put together a series of measures to promote consumer understanding. Specifically, we will (1) consolidate our consumer understanding promotion tools into three core Guidebooks (i.e. "General Insurance Buyers' Guide", "General Insurance Buyers' Guide for Senior Citizens", and the soon to be published "General Insurance Buyers' Guide for Young Persons"), (2) create and upload attractive consumer understanding promotion content on the GIAJ's website, and (3) utilize various media channels to publicize and promote our activities in this field. We will actively work on assisting consumers to better understand general insurance and feel more confident about the policies they are purchasing.
(ii) Creating links between the GIAJ's website and member companies' websites
To help the public better understand how our member companies are working to restore consumer confidence, we have established new links between their websites (introducing their individual measures and actions) and the website of the GIAJ. We would invite consumers to take a look at these informative sites.
（iii) Free discussion on Comparison of Insurance Products
We held the second "Free Discussion on Comparison of Insurance Products" on 20th September. Around 100 participants (including consumers and agents/solicitors) gathered for this event, and as happened at the first such Discussion, we did not set any specific themes or agenda beforehand. Everyone freely voiced their opinions on a broad number of issues. The third round of discussions will be held in late January. Based on the opinions raised so far, this time we will be focusing on issues such as "minimum requirements/conditions for the comparison of insurance products" etc. We will post further information on our website very soon.
(1) Measures to promote Security and Safety in our Society
(i) "Automobile Theft Prevention Day" events held on 5th October
Since 2003, we have made 7th October "Automobile Theft Prevention Day", and have run many campaigns to promote this cause. This year we held promotion events in 64 locations across all 47 prefectures on 5th October. Although the number of automobile thefts has been in decline these last several years, we have seen some increases over the past few months. We will continue to work on raising awareness on preventative measures among car owners.
(ii) The Fourth competition for "Exploration for Disaster Prevention" Maps
We held a competition for maps made by children who participated in our "Exploration for Disaster Prevention" event (held from April to late November), an educational program designed to raise risk-awareness among elementary school students. We have received over 1,374 entries from 257 schools and children's groups across the country, and after a strict selection process, we have chosen 15 winners. All the maps were most illustrative and superbly crafted, each showing the locations of local police/fire stations, hospitals, emergency supply storehouses and so forth. The maps also identified local natural catastrophe perils and hazardous areas around town. It is our sincere hope that these maps (which are full of useful hints to make our towns safer places) will be put to good use in each local district.
(2) Measures related to System Reform
(i) Insurance Contract Law
Discussion by the Legislative Council on insurance contract law (i.e. the Commercial Code relating to insurance contracts) is progressing, and a draft of the new legislation is expected to be released next month. In parallel with these discussions, the Financial System Council has commenced its deliberations on revising the Insurance Business Law (in relation to the expected changes to the insurance contract law). We will continue to voice our opinions and make comments to ensure the revised law will not only set out rules that adequately meet the unique and modern needs of consumer protection and the prevention of insurance-related criminal acts, but also contribute to the promotion of product development and industry prosperity.
(ii) Complete liberalization of insurance sales by banks
Following the final discussions in the Financial System Council, bank sales of insurance will be completely liberalized from 22nd December. We will work to ensure that full effect is given to both consumer protection and consumer benefits.
(iii) Other regulatory reform
The Financial System Council is currently considering two of our industry's regulatory reform requests, namely "Doing away with regulatory limits on investment per type of asset" and "Revising the basis (i.e. admitted units) of portfolio transfers". From the view of improving our international competitiveness, we will continue to request regulatory reform that is in line with our goal to create a free business environment and to facilitate the swift restructuring of businesses.
(iv) Requests for tax reform
On 13th December, the ruling party in our parliament released the "Fundamental Principles for Tax Reform: Fiscal Year 2008". Our industry's main request, namely the "Request to allow premiums for private insurance products that complement social security (for example medical expense insurance, nursing care expense insurance and annuity insurance) to be treated as deductible expenses" was recognized as an item "to be considered". The Government has mentioned it will fully consider our request again next fiscal year.
(v) International issues
(a) IAIS (International Association of Insurance Supervisors):Guidance Papers on Insurer Solvency Management
This October, the IAIS adopted a series of international guidance papers on insurer solvency management. We have participated in these discussions as an observer from the very beginning, and have contributed through numerous comments and suggestions. These guidance papers will lead us in the right direction as we work on further improving and advancing our risk management skills and financial strength.
(b) Requests made under the Japan-U.S. Dialogue on Regulatory Reform and Competition Policy
Our government has taken up and reflected all three of our industry petitions in this year's official request statement to the U.S. With regard to our appeal for "reform and modernization of U.S. reinsurance collateral regulations", we are pleased to note that the States of New York and Florida have each recently put forward proposals for reform. We will continue to work hard to make progress on our requests.
It has been almost six months since I took office as Chairman of the GIAJ. How time flies. Ever since my first day as Chairman, I have taken various issues head on, and I intend to continue to do so throughout the latter half of my tenure. I hereby reconfirm my pledge to do everything in my power as Chairman to make further steady progress in restoring consumer confidence in our industry, and creating a firm bond of trust with customers through general insurance.