- YOMIURI EDITORIAL
Sompo Japan: Tacit Acceptance of Fraud by Business Partner Unacceptable
16:35 JST, September 9, 2023
The top management of a major nonlife insurance company is said to have tacitly approved a fraudulent practice on the part of its business partner. It is only natural that executives of such a company take responsibility for this action. The scandal must be fully clarified, and inappropriate corporate governance must be thoroughly corrected.
Sompo Japan Insurance Inc. President Giichi Shirakawa has announced that he will step down from the post in connection with fraudulent insurance claims by major used car dealer Bigmotor Co.
Controversy broke out after the revelation that Shirakawa, at an internal meeting, had sought to continue business deals with Bigmotor, with which Sompo Japan had concluded an insurance agency contract, although he had been aware of the possibility of the car dealer having made fraudulent insurance claims.
On that subject, Shirakawa said at a press conference, “I made a major mistake on business decisions.” He cited this mistake as the reason for his resignation.
It would be unacceptable if he prioritized his company’s profits over protecting customers.
Bigmotor employees were found to have deliberately damaged vehicles that customers brought in for repair and then charged nonlife insurance companies with a padded amount for the repairs.
In January last year, suspicions of such fraud surfaced in a whistleblower complaint. Following that, three major nonlife insurance companies suspended business with Bigmotor and called on the car dealer to conduct an investigation. In response, Bigmotor claimed that the practice was not systematic but was caused by operational errors.
After that, Shirakawa reportedly said at a meeting on July 6 last year, which Sompo Japan held to decide on its handling of the Bigmotor issue, that the dealer was highly likely to be engaged in fraud — but he also proposed the early resumption of business transactions, for fear of deterioration in the relationship with Bigmotor.
The lack of awareness of compliance with laws and regulations is simply astonishing — and it presents a stark contrast with the fact that the other two major nonlife insurers continued to suspend business with Bigmotor. At the meeting, some Sompo Japan executives called for an additional probe, but such calls were not acted upon. The company’s failure of corporate governance is serious.
The two companies had a logrolling relationship in which Sompo Japan referred its auto insurance policyholders who had car accidents to Bigmotor garages for repairs, while Bigmotor allocated its customers’ mandatory automobile liability insurance contracts to Sompo Japan.
Sompo Japan dispatched a total of more than 40 employees to Bigmotor from 2004. It is necessary to thoroughly investigate whether these employees were involved in the fraudulent practice.
Kengo Sakurada, chairman of parent company Sompo Holdings, Inc., was also reportedly informed of the circumstances surrounding the company’s resumption of business deals with Bigmotor. Sakurada had served as the chairman of the Japan Association of Corporate Executives until this spring, and thus bears a heavy responsibility for having overlooked the situation.
The Financial Services Agency plans to soon conduct on-site probes into Sompo Japan and Bigmotor. The agency should respond to the matter strictly by taking such action as imposing administrative punishments in order to prevent a recurrence.
(From The Yomiuri Shimbun, Sept. 9, 2023)
"EDITORIAL & COLUMNS" POPULAR ARTICLE
Increasing Uncertainty Makes Decisions on EV Strategy Difficult
Kishida Losing Power to Call Snap Election as Political Decisions Backfire
G7 Rushes to De-Risk to Protect Sensitive Tech
Govt Should Take Responsibility for Maintaining Cultural Facilities
Awareness of Bias Blind Spots Is the First Step to Mutual Understanding
JN ACCESS RANKING