Irresponsible practices of insurance firms must be thoroughly addressed

The Yomiuri Shimbun

It is a problem if practices of making light of customers still remain in corporate culture in a leading nonlife insurer.

It came to light recently that Tokio Marine & Nichido Fire Insurance Co. had failed to partially pay out automobile insurance benefits that policyholders were entitled to over a period of more than 10 years.

The unpaid cases concerned special benefits in auto insurance to cover extra costs, such as consolatory money to be paid to victims injured in accidents or otherwise. According to the insurer, there may be more than 100,000 special benefit policies left unpaid.

Through an inspection of the life and nonlife insurance sectors led by the Financial Services Agency in 2005, nonpayment cases were discovered on an alarmingly large scale. The agency imposed a series of administrative punishments, resulting in a wave of corporate manager resignations.

With costly lessons learned, the insurance companies involved have taken measures to prevent a recurrence of nonpayments in the future.

However, it is a problem that Tokio Marine has decided to exclude the special benefits contracts when the company conducted internal inspections in 2005 and 2006.

Claiming that the company had applied the corporate rules of paying out the special benefits only if claims were made, Tokio Marine has still insisted that the company’s previous actions did not constitute nonpayment. However, this argument suggests that the company places the logic within its own circles rather than interests of its customers.

Some policyholders unfamiliar with insurance contracts failed to claim special benefits, which are in themselves quite diverse.

Insurers must explain

Responsibility lies with an insurance company to clearly explain the contract to policyholders, ensuring they do not fail to make their claims when they are most likely to be in a state of confusion after being involved in an accident.

Tokio Marine said the company changed its policy in July 2003 so that it would pay insurance benefits even if claims are not made. But the company failed to brief policyholders with the change in rules, at a time when they should have solved the nonpayment cases retrospectively.

At a press conference, Tsuyoshi Nagano, president of Tokio Marine, said, "We did all we could at the time," justifying the company’s actions in the past. It is not surprising that the policyholders who were unable to claim their insurance benefits may be left unconvinced with such an explanation.

Many of them are just as skeptical about the stance of the Financial Services Agency, which considers the insurer’s actions as "not being a problem."

Consumers may grow more distrustful of insurers that, while they have people sign insurance contracts by capitalizing on various kinds of special benefits, are unwilling to pay insurance benefits when accidents occur. To prevent such feelings, expectations are rising for Tokio Marine to explain itself and sincerely respond to policyholders.

Nagano has said that the company will flexibly deal with benefit payouts if claims are made from now on. But uncertainty hangs in the air because the company stores relevant data for nine years, meaning most of the data related to the unpaid special benefits have already been destroyed.

Tokio Marine should do all in its power to remedy the situation by consolidating what details can be gleaned from memory of its employees and examining any remaining copies of relevant documents with great care.

Other nonlife insurance companies would do well to heed Tokio Marine’s case not just as "someone else’s misfortune" but as a wake-up call to look out for and address any outstanding nonpayment cases.

Source The Japan News