Tokyo [Japan], October 11: Japan's financial watchdog on Friday ordered Prudential Life Insurance Co to partially suspend its business over misconduct by sales staff, including improperly receiving money from customers.
The suspension of operations related to new insurance contracts will run from Tuesday through Jan 31, with the Financial Services Agency determining that Prudential Life Insurance had failed to adequately manage and supervise its sales employees and that internal systems designed to prevent misconduct were ineffective.
The financial watchdog also urged the company to clarify the responsibilities of current and past executives who prioritised sales promotion while leaving misconduct unaddressed.
Although the misconduct cases included defrauding customers of money, the agency stopped short of imposing more severe penalties such as revoking the company's license to operate as an insurer.
The punishment came after Prudential Life Insurance said Thursday a third-party probe by lawyers had found that more than 100 former and current salespeople had engaged in fraudulent or inappropriate transactions with customers worth 5.2 billion yen ($33 million) over more than three decades.
Prudential Life Insurance voluntarily suspended sales activities for new contracts in February, but cases in which its employees improperly received money from customers were revealed even after that.
The financial watchdog found that the management's supervision had been ineffective, leaving it uncertain whether the company will be allowed to resume sales after the suspension period is over.
Meanwhile, the company will continue to provide services related to existing contracts, including the payment of insurance money and benefits.
The agency on Friday also issued a business improvement order to Prudential Holdings of Japan, the parent company, and a partial business suspension order to The Gibraltar Life Insurance Co, a group company.
The parent company said in a statement that it takes the punishment seriously and will move forward with structural reforms.
Prudential Life Insurance Co said Thursday that President Hiromitsu Tokumaru and two other executives will voluntarily return 30 percent of their monthly remuneration for three months to take responsibility for misconduct by sales staff including improperly receiving money from customers.
The insurer also said it had taken disciplinary action, including dismissal, against 157 current and former sales employees involved in the financial misconduct.
The company released a report by an outside investigation panel that included lawyers, which cited a pay system for sales staff that put too much weight on sales of new contracts as one of the problems behind the misconduct.
To prevent similar misconduct, the insurer said it plans to introduce guaranteed minimum pay for sales staff from 2027.
The Japanese subsidiary of US-based Prudential Financial Inc disclosed in January that around 100 of its employees had defrauded about 500 clients out of about 5.2 billion yen.
The insurer has voluntarily suspended sales of new policies since February to review its governance and sales practices.
Source: Qatar Tribune
