With a career dedicated to navigating the complexities of insurance and risk, Simon Glairy has become a leading voice on the technological and cultural shifts shaping the industry. Today, he joins us to dissect the recent wave of scandals rocking Japan’s insurance sector. We will explore the deep-seated issues of lax supervision and intense sales pressure that have led to widespread misconduct, examine the resulting damage to investor confidence, and consider the implications of a new, more stringent regulatory environment. Finally, we will discuss how this crisis of trust could impact Japan’s broader economic ambitions to encourage a national shift from saving to investing.
With major firms like Dai-ichi Life revealing that employees improperly obtained thousands of pieces of customer data, what systemic failures in supervision does this expose? Please describe the specific steps insurers must now take to rebuild trust in their data handling processes.
This isn’t just about a few rogue employees; it’s a glaring symptom of a much deeper, systemic problem of lax supervision. When you see a company like Dai-ichi Life admit that 64 of its seconded employees managed to obtain over 1,000 pieces of sensitive data without approval, it tells you that the oversight mechanisms are fundamentally broken. The companies simply cannot properly grasp what is happening on their sales fronts. To rebuild trust, the first step must be absolute transparency. They need to go beyond statements and conduct thorough, independent audits of their data access protocols. Second, they must invest heavily in technology that can monitor data handling in real-time and flag suspicious activity. Finally, there has to be a cultural shift, moving from a culture that tacitly accepts cutting corners to one where accountability is enforced from the very top down.
Experts suggest intense sales competition in a shrinking market is fueling misconduct. How does this pressure manifest on the ground for sales agents? Could you share some examples of new performance metrics companies could adopt, beyond pure sales, to encourage more ethical customer-centric behavior?
The pressure is immense. The total market for individual life insurance policies has shrunk by about ¥10 trillion in a single year, yet the sales forces remain massive. For the agent on the ground, this translates into a frantic, high-stakes environment where their livelihood depends on hitting ever-more-difficult targets. This is a perfect breeding ground for misconduct, as the focus shifts from serving the customer to simply closing the deal. To change this, leadership must stop managing operations with a myopic focus on sales and profits. Instead of just rewarding the volume of new policies, they could introduce metrics like customer longevity, policy persistency rates, and client satisfaction scores. Imagine tying a significant portion of an agent’s bonus to how long their clients remain with the company and how highly they rate the service they received. This would fundamentally realign incentives toward building long-term, trust-based relationships rather than just hitting a monthly quota.
Despite favorable interest rate hikes, Japanese insurer stocks have lagged the broader market significantly over the past year. To what extent do you believe these scandals are damaging investor confidence, and what concrete actions, beyond apologies, must leadership take to restore shareholder value?
The damage to investor confidence is undeniable and is a major factor in the sector’s underperformance. When you see the Topix insurance index gain only 32% while the broader market is up 42% and banks are up a staggering 77%, it’s clear that investors are pricing in a significant risk premium for these governance failures. Interest rate hikes should be a powerful tailwind, but the constant drumbeat of scandals—from price rigging to improper sales at firms like Prudential, which had to suspend sales for 90 days—is completely negating that benefit. To restore shareholder value, leadership must demonstrate a genuine commitment to reform. This means more than just a press release. Investors need to see heads roll, a complete overhaul of compliance divisions with real authority, and transparent reporting on the new control measures being implemented. They must prove that this is a turning point, not just another crisis to be weathered.
Japan’s Financial Services Agency is establishing a new division to oversee the insurance sector. What specific regulations or enforcement actions do you anticipate from this? Please detail how this heightened scrutiny will practically change the day-to-day operations and compliance priorities for these companies.
The creation of a new FSA division is a clear signal that the era of light-touch regulation is over. I anticipate a much more proactive and intrusive approach. We can expect unannounced spot-checks, deep-dive audits into sales practices, and much stricter requirements for reporting and data security. For the companies, this will mean a radical shift in day-to-day operations. The compliance department can no longer be a back-office function; it will need to be embedded in every aspect of the sales process. Every new policy sale might require a multi-step verification process, and data access for seconded employees will likely be severely restricted and heavily monitored. The cost of doing business will certainly rise, but the cost of another scandal is far greater. This is the new reality they must adapt to.
This crisis of trust is emerging just as policymakers are encouraging households to shift from saving to investing. How might these repeated scandals impact the government’s broader economic goals? What collaborative steps should the industry and regulators take to ensure these national initiatives don’t falter?
The timing could not be worse, and the impact could be devastating to the government’s economic agenda. The entire “from saving to investing” initiative is built on a foundation of trust in financial institutions. If the public sees the country’s largest insurers—companies they trust with their families’ futures—mishandling data and engaging in improper sales, how can they be expected to hand over their life savings for investment? It creates a powerful narrative of distrust that could cause households to retreat further into cash savings, completely undermining the policy goal. To prevent this, a collaborative effort is essential. The FSA must not only enforce rules but also launch public awareness campaigns to educate consumers about their rights. The industry, for its part, must go beyond mere compliance and work together to establish a new, industry-wide code of ethical conduct with real teeth, proving to the public that they are serious about cleaning up their act.
What is your forecast for the Japanese insurance industry?
The near future will be a period of painful but necessary adjustment. We will see increased compliance costs squeeze margins, and I suspect more misconduct will be uncovered as regulatory scrutiny intensifies, leading to continued stock market volatility. However, this crisis is also a critical catalyst for modernization. The companies that survive and thrive will be those that genuinely embrace a customer-first culture, invest heavily in technology for better oversight and risk management, and prove that they can be trusted stewards of their clients’ data and financial futures. In the long run, this could forge a stronger, more resilient, and more trustworthy industry, but the path to get there will be turbulent.
