Photo/Illutration From left, Sompo Japan Insurance Inc. President Giichi Shirakawa and Sompo Holdings Inc.’s Chairman Kengo Sakurada apologize and bow at the beginning of a news conference in Tokyo’s Shinjuku Ward on Sept. 8. (Tatsuya Shimada)

Sompo Japan Insurance Inc. President Giichi Shirakawa announced his resignation on Sept. 8 to take responsibility for the company’s handling of alleged fraudulent insurance claims by leading used car dealer Bigmotor Co.

Shirakawa certainly had that coming, as he reportedly insisted on resuming business ties with Bigmotor even though he presumed the car dealer to be eventually found guilty.

Instead of preventing insurance fraud like any insurance company chief should, Shirakawa turned a blind eye to what had taken place on his watch. His responsibility is grave, and this scandal needs to be fully exposed without delay.

After Bigmotor’s insurance fraud cases came to light in June last year, Sompo Japan suspended its practice of referring its policyholders to the car dealer’s repair shops.

But during an in-house conference the following month, Shirakawa argued vigorously against the suspension and decided on resuming ties with Bigmotor as the only major insurance company to do so.

But Bigmotor’s wrongdoing continued.

At the Sept. 8 news conference, Shirakawa defended himself, claiming he was convinced of the localized and limited nature of Bigmotor’s misconduct.

He also admitted, “We had strong concerns that business would shift significantly to our competitors.”

We must say his decision was one that put his company’s interests first and downplayed the need to protect his customers and abide by the law.

When Bigmotor served as Sompo Japan’s premier insurance agency selling its auto liability insurance policies, Sompo staffed the agency with about 40 of its own employees and approved a simplified screening procedure for customers looking to subscribe to Sompo policies.

Could a collusive relationship have resulted from the practice of allocating auto liability insurance policies according to the number of customers referred to Bigmotor’s repair shops? This needs to be explored.

An outside investigative committee, established at the end of July, is said to be examining Sompo Japan’s handling of the alleged insurance fraud.

The company must live up to its accountability by scrutinizing its relationship with Bigmotor and the circumstances under which wrong executive decisions were made, as well as look into cases--if any--of involvement of employees dispatched from Sompo in Bigmotor’s scam.

Also, reparations must be made without delay for policyholders who became victims of the fraud.

One focal issue of investigations is the adequacy--or lack thereof--of the Sompo group’s corporate governance.

Kengo Sakurada, chairman of parent company Sompo Holdings Inc., is said to have started receiving reports on the alleged fraud in August last year. Sakurada is also on Sompo Japan’s board of directors.

Until this past April, Sakurada served as the chairman of Keizai Doyukai (the Japan Association of Corporate Executives) and severely pointed to the responsibilities of top executives of Mitsubishi Electric Corp. and Kansai Electric Power Co. when they were found to be involved in scandals.

How will Sakurada deal with a scandal within his own group? His integrity is being tested.

In the near future, the Financial Services Agency intends to raid the offices of Sompo Japan and Bigmotor under the Insurance Business Law. We hope the agency will help to piece together what transpired and act firmly on its findings.

All of Japan’s major non-life insurance companies have been investigated by the agency and the Fair Trade Commission on suspicion of making prior price adjustments for corporate insurance policies.

And in 2005, all the companies were subjected to administrative punishment when their nonpayment of insurance benefits came to light.

Could their disregard for the welfare of policyholders still be deep-rooted today? This needs to be investigated again.

--The Asahi Shimbun, Sept. 12

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