The GIAJ Chairman's Statement (Translation)
（June 13, 2013）
Since I assumed office as Chairman of the GIAJ in June 2012, we have worked on various measures to make general insurance, an important part of the overall infrastructure, and general insurance companies more robust, sound, and reliable. I would like to report the progress made on our major initiatives during my one-year tenure and offer my views.
1. Progress on our major initiatives
(1) Measures to make general insurance more robust, sound, and reliable
i. Enhancing public awareness of general insurance
(a) Establishment of the 'Customers Voices and Experts Advisory Council'
For broader discussions on issues related to the general insurance industry, we established the 'Customers Voices and Experts Advisory Council' (CVEAC) to replace the 'Advisory Panel to Listen to Consumers' Voices'. Under the CVEAC, two new task forces, one on better ways to make sales materials and solicitation practices more consumer-friendly, and the other on measures for tackling insurance fraud and fraudulent claims, have engaged in in-depth discussions and identified future challenges (please refer to 1. (1) i. (b) and 1. (1) ii. (a) for details). We will make use of these initiatives.
(b) Measures on harmonization and standardization
We have advanced our efforts to harmonize application procedures and forms as part of the main initiatives laid out in our Sixth Mid-Term Business Plan. We submitted to the Financial System Council's 'Working Group on Insurance Products and Services' consumer-friendly design examples of sales materials for automobile insurance, prepared by the CVEAC's task force on better ways to make sales materials and solicitation practices more consumer-friendly, and explained the legal challenges of introducing them. Currently, we are drawing up industry-wide guidelines to develop sales materials, and working on design examples for other products. We are conducting measures on harmonization and standardization in other areas as well. In addition, we have begun to streamline the industry’s infrastructure such as its information systems, and are enhancing the operational efficiency of both insurance agents and insurers.
(c) Promoting financial and insurance education
The Financial Services Agency's 'Research Group on Financial and Economic Education' compiled a report outlining ways to promote financial and economic education to contribute to the development of a just, sustainable society through customers' improved financial literacy. The agency's newly established 'Council on Promotion of Financial and Economic Education' will engage in concrete discussions on the details of financial literacy education. With those discussions in mind, we will put effort into public education by promoting use of our 'General Insurance Buyers' Guide', as well as providing lecturers and/or materials for high school and university classes.
(d) Review of insurance solicitation regulations at the Financial System Council
The final report of the Financial System Council's 'Working Group on Insurance Products and Services' calls for new rules regarding insurance solicitation, some covering issues that we have already addressed in our efforts to improve customer services. Suggestions include a rule that requires agents and solicitors to first identify a customer’s needs and to propose and explain suitable products, so as to enable the customer to determine that the policy he or she is about to purchase does indeed match his or her needs. The report also acknowledges that innovation in solicitation practices, such as efforts to improve sales materials, can be more effective than detailed regulations. In line with the ideas behind the report, we will advance our discussions and support member companies' innovation with the goal of achieving deeper understanding of insurance on the part of customers.
(e) Launch of the 'General Insurance College Course'
We have launched the 'General Insurance College Course' and, jointly with the Independent Insurance Agents of Japan Inc., have been operating the Professional and Consulting Courses since last July and April, respectively. Over 35,000 sales staff are accredited 'General Insurance Planners' proficient in laws and taxes related to insurance. With due respect to the discussions and report of the Financial System Council's 'Working Group on Insurance Products and Services', we will strive to increase the number of sales staff capable of providing customers with more appropriate, quality advice.
(f) Enhancing the 'General Insurance ADR Center'
In order to further enhance our member companies' response capability to customer complaints, our 'General Insurance ADR Center (General Insurance Counseling and ADR Center)' has introduced a framework to alert and provide member companies with recommendations for improvement in regard to serious grievances it receives from customers. Based on the report issued by the Financial Services Agency's 'Experts Council on the Follow-up of the Financial ADR System', we will strengthen our system to listen to consumers' voices with more sincerity and reflect their concerns in our business operations.
ii. Minimising social losses (Prevention of insurance fraud and fraudulent claims)
(a) Measures to prevent insurance fraud and fraudulent claims
I visited the Association of British Insurers and the General Insurance Association of Korea to discuss measures against insurance fraud and fraudulent claims. In January, following our survey results on the level of the general public's ethics and morals, we launched the 'Insurance Fraud Prevention Office', which operates the 'Insurance Fraud Hot-line', gathers and analyzes data collected from insurers, and assesses the state of insurance fraud. We have received various recommendations from the CVEAC's task force on measures for tackling insurance fraud and fraudulent claims, including the necessity of a dedicated database, prevention of automobile theft, cooperation with the police, and combating claims on disguised snow damage. The GIAJ, led by the 'Insurance Fraud Prevention Office', will take these recommendations into consideration and accelerate our awareness-raising activities.
(b) Measures to prevent traffic accidents and reduce related damage
In order to help prevent and reduce resulting social losses, we analyzed details of traffic accidents and conducted nation-wide activities to enhance public awareness of crime and disaster prevention. We also participated in the 'Government-Private Sector Joint Automobile Theft Prevention Project Team' discussions, and conducted awareness-raising activities for auto theft prevention such as 'Theft Prevention Day' events. While the number of thefts has declined sharply, close examination reveals a tendency towards sophistication in their manner. We will consider further countermeasures and enhance our cooperation with relevant parties.
(c) Promoting use of recycled automobile parts
Use of recycled parts for vehicle repairs reduces both the environmental burden and repair costs. We will continue to promote the use of recycled parts in cooperation with relevant organizations.
(2) Measures to make general insurance companies and businesses more robust, sound, and reliable
i. Strengthening the soundness of general insurance companies
(a) Response to tax reforms
As part of the package of tax revisions for fiscal 2013, the existing pre-event catastrophe reserve system concerning fire insurance will be broadened, with the current four percent accumulation rate raised to five percent for the next three years. We aim to take advantage of the tax reform to swiftly restore the catastrophe reserves that have been reduced by recent catastrophe losses. We today finalized our petitions for tax reforms for fiscal 2014. Priority issues include making permanent the transitional measure (expiring in fiscal 2014) that exempts interest generated by saving premiums accounts of general insurance companies from deduction of interest on borrowed funds. We will advance our industry's unified efforts to reach out to various related parties and call for support.
(b) Review of the Residential Earthquake Insurance system
The Residential Earthquake Insurance system has become more resilient as the manner of sharing the burden between the government and the industry has been modified in the fiscal 2013 budget. We believe this revision further ensures payment of claims and raises the sense of security in the system. We are determined to further promote Earthquake Insurance, which is designed to help those affected by earthquakes to get back on their feet as soon as possible.
(c) Enhancing business continuity management
With the goal of avoiding any inconvenience to customers even in times of major earthquakes, we undertook a thorough review of our Business Continuity Plan (BCP). We created a procedural manual to maintain high-priority functions such as providing support to our member companies' important activities. We, along with relevant authorities, also conducted drills in alternate locations in times of disaster. We will review our BCP based on the results of the drills and better prepare ourselves.
(d) Voicing our opinions on international regulatory issues
We submitted comments on the draft of IAIS's ComFrame (Common Framework for the Supervision of Internationally Active Insurance Groups) and the proposed identification methodology and policy measures for G-SIIs (Global Systemically Important Insurers), calling on the IAIS to take better account of the features of insurers' businesses. We will continue to express our views and interact with concerned parties to ensure that international insurance supervision and regulations examine the characteristics of general insurance businesses, and set a framework which encourages insurance groups with overseas operations to strengthen their soundness.
(e) Framework for orderly resolution of financial firms
A system for orderly resolution of every type of financial firm, including banks, security brokering firms, and insurers, in the event of a financial market contagion crisis will be introduced in Japan. We will seek to ensure that any discussion on the detailed design of the framework is reflective of the unique characteristics of individual sectors including general insurance. We will also go ahead with preparations to appropriately deal with the new framework.
ii. Diversifying our business to better meet customer needs
(a) Review of the regulatory scope of business for insurers at the Financial System Council
We requested the Financial System Council's 'Working Group on Insurance Products and Services' to ease the conditions that allow insurers to engage in concerted activities, and gained the Working Group's understanding of the need for systematic support for compilation of relevant data regarding risks and damage. We believe that the Working Group also welcomed our proposal to allow insurance groups to engage in a wider range of insurance associated services such as trust services vis-à-vis paid insurance claims and services ancillary to consulting on loss prevention. We continue to cater to our customers' various needs with an eye on the revised regulations to come.
(b) Collaboration with overseas institutions
We joined the GFIA (Global Federation of Insurance Associations) upon its establishment last October, as part of our efforts toward the development of general insurance businesses in Japan and overseas. Along with the Non-Life Insurance Institute of Japan, we also hosted the ISJ (Insurance School of Japan) seminars in Myanmar and Cambodia, among others, and had bilateral discussions with Asian insurance associations and relevant authorities, including those of Viet Nam and India, on the roles and activities of insurance associations following liberalisation and deregulation. In addition, we, together with the General Insurance Rating Organization of Japan and the Non-Life Insurance Institute of Japan, have agreed with our Indonesian counterparts to develop a cooperative relationship and to provide them with technical assistance regarding general insurance systems. We will accordingly provide support for establishment of an Indonesian rating organization.
We will continue to engage in discussions with overseas institutions.
(c) Government-private sector roundtable
A government-private sector roundtable was launched as a forum for dialog between supervisors and financial industries including the general insurance industry. So far, it has drawn up three reports outlining issues to be addressed by financial firms and possible solutions, so that they may achieve growth while better striving to contribute to the real economy. We will shortly take feasible measures and support our member companies, such as in providing technical assistance to Asian counterparts and properly responding to an aging, shrinking population.
The role of general insurance in supporting the day to day lives of people and the greater economy, and its indispensability in society, remain unchanged. Meanwhile, as the expectations for general insurance are ever-changing with the economy and society, it is necessary for the industry to take a greater role in keeping with such expectations. We will make tireless efforts to lay and strengthen the foundations for the future in terms of protecting people's lives and contributing to the economy.
I would like to express sincere gratitude for your warm support and cooperation tendered throughout my one-year tenure. We would highly appreciate your continued support and cooperation.