Japan's Financial Services Agency and the Ministry of Land, Infrastructure, Transport and Tourism on 13 October jointly asked the non-life insurers' trade association to make sure its members run an agency quality scheme as intended: through sustained dialogue, tailored to each agency's size and business, and without treating the exercise as a path to termination. The request lists seven steps for insurers. It follows complaints from agencies about how the scheme is being applied. See also Earlier Tokyo Brief coverage.
What agencies complained about
The scheme is run by the trade association and is part of the industry's effort to rebuild trust after a series of improper cases. It is meant to let agencies raise their own business quality through continuing talks with the insurers they work for. Some agencies told the regulators they were being asked for excessive systems and controls, and that insurers had unilaterally hinted at ending agency contracts without enough discussion.
The request says that conduct taken as presuming termination, or uniform handling that ignores an agency's size and characteristics, would run against the scheme's purpose. It adds that such conduct would not improve quality and could shrink customer contact points in local areas.
Why motorcycle dealers and garages feature
The request singles out agencies such as motorcycle dealers and repair shops. It says they help counter uninsured vehicles and ease burdens on users, and that fewer of them could cost customers the chance to buy compulsory auto liability insurance (jibaiseki).
The FSA surveyed insurers' handling of the scheme. It found that dialogue with agencies had broadly been adequate to a degree, with differences between insurers, but also some differences in understanding on the ground, operational problems, and cases needing improvement. A ministry survey of motorcycle dealers and repair shops found some where insufficient dialogue with insurers was suspected.
The seven requests
Insurers are asked to do the following.
- Have management re-communicate the scheme's purpose to sales departments and branches.
- Build explanation processes for agencies, and give advice and support suited to each agency's size and business. The request notes that insurers have a duty to manage, guide and supervise agents.
- Check documents given to agencies for inappropriate or misleading wording.
- Have head offices track and verify how sales units run the scheme, and report regularly to management.
- Avoid uniform improvement deadlines or uniform handling without a reasonable basis. The request notes that agencies selling voluntary cover and those selling only compulsory auto insurance have different quality items to meet.
- Review cases, including those from the trial period, where an insurer believes a contract ended without sufficient quality dialogue, and reopen talks if an agency asks to renegotiate. Any targets for transaction numbers should rest on mutual agreement after careful discussion.
- Foster appropriate incentives in the sales field to encourage agency quality work, for example by reflecting recognised agency quality gains in the performance evaluation of sales branches and staff.
The regulators also asked the association to recheck whether the questions and standards in its self-check sheet suit agencies' size and business characteristics.
The FSA release calls this a request to the association, not a formal order, and names no insurer. The release does not give a deadline or say how many agencies or terminations are involved.