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A major non-life insurance company that is supposed to give its clients peace of mind allegedly prioritized its own profits and neglected the protection of its customers. The shakeup of its management team should be used as an opportunity to fundamentally change the corporate culture of the business.
In connection with a scandal involving fraudulent insurance claims by leading used car sales company Bigmotor Co., the Financial Services Agency (FSA) has issued business improvement orders to Sompo Japan Insurance Inc. and its holding company, Sompo Holdings, Inc. under the Insurance Business Law.
The FSA demanded clarification of management’s responsibility and other measures over the issue, saying that Sompo Japan’s handling of Bigmotor facilitated the used car sales company’s fraud and caused widespread harm to customers.
In response, Sompo Holdings Chairman and Group CEO Kengo Sakurada announced that he would step down from his posts at the end of March. Sakurada apologized at a press conference, saying, “I am profoundly regretful, and I am reflecting seriously on this matter.”
Sompo Japan President Giichi Shirakawa has already announced his resignation to take responsibility for the situation.
Management’s responsibility is extremely grave, and it is only natural that they should step down.
The fraud perpetrated by Bigmotor involved its employees intentionally damaging vehicles that customers had asked Bigmotor to repair, and then sending non-life insurance companies padded insurance claims.
Sompo Japan had dispatched some of its employees to Bigmotor on loan. The fraud was reported to the sales department and others, but they did not inform management out of fear that Sompo Japan’s relationship with Bigmotor would deteriorate and affect their insurance sales results. The matter was left unaddressed.
As a result of later whistleblower reports on Bigmotor’s wrongdoing, the three major non-life insurance companies that had relationships with Bigmotor stopped doing business with the company in June 2022.
Sompo Japan was one of the three non-life insurers, but it decided at a meeting in July 2022 to resume business transactions at Shirakawa’s proposal, despite knowing there were strong suspicions of fraud. Top management can be said to have tacitly approved of the fraud, which was a terrible error in judgement.
The responsibility of Sompo Japan Insurance’s parent company, Sompo Holdings, should not be minimized. It was only after the fraud came to light in news reports in August 2022 that it was informed of what was going on, but even then, it failed to actively gather information or provide guidance on how to deal with the situation.
The FSA views Sompo Japan’s corporate culture — in which “inconvenient information is not reported to management or the parent company in a timely and appropriate manner” — to be problematic, and improvement is urgently needed.
Since becoming president of Sompo Japan in 2010, Sakurada has had tremendous influence over the group’s management. Until last spring, he served as the chairman of the Japan Association of Corporate Executives and has been a harsh critic of corporate scandals.
Unless the new management teams use Sakurada’s stepping down as an opportunity to thoroughly reform the corporate culture, there is little hope of restoring trust in the company.
