Tokyo, Oct. 9 (Jiji Press)–Japan’s Financial Services Agency on Friday ordered Prudential Life Insurance Co. and Gibraltar Life Insurance Co., both part of the U.S. Prudential Financial Inc. group, to suspend some operations for more than three months over fraud committed by their employees. The FSA also issued a business improvement order to Prudential Holdings of Japan Inc., the parent company of the two Tokyo-based life insurers, calling for stronger corporate governance. Under the partial business suspension order, which runs from Tuesday to the end of January 2027, the two insurers will be prohibited from entering into new insurance contracts or selling insurance products, so that they can focus on rebuilding their management and oversight systems. The financial watchdog called for reforms to prioritize legal compliance and customer protection over sales, and ordered the submission of a business improvement plan by the end of November. This is the first time the FSA has ordered a life insurer to suspend operations since it took such action against Japan Post Insurance Co. in 2019. Prudential Life has voluntarily refrained from making new sales since February, and the FSA’s order will further delay the resumption of its sales activities. Prudential Life had hired sales staff, known as “life planners,” at each branch, and their compensation was tied entirely to sales performance. The FSA pointed out that “each branch, headed by its branch manager, had strengthened its presence and independence.” Although this created circumstances conducive to financial misconduct, successive management teams had left the problem unaddressed for years, cultivating a corporate culture in which the company could not challenge branch sales operations and branch offices had considerable discretion. An FSA probe found that some life planners sold customers insurance products against their wishes and that some former employees improperly took customer information from Prudential Life. The agency also called for clarifying the accountability of former company executives, including those at the parent firm. The three companies said in a statement that they took the FSA order very seriously and will make every effort to prevent a recurrence and restore trust. In January, Prudential Life said that more than 100 of its current and former employees had improperly received a total of 3.1 billion yen from customers, prompting the resignation of then President Kan Mabara and an on-site inspection by the FSA. According to a third-party investigation report released Thursday, the total amount of losses reported by victims exceeded 6.1 billion yen on a self-reported basis. The report cited a corporate culture that placed excessive emphasis on sales performance as one of the causes of the misconduct. Prudential Life plans to review its compensation system, which relies heavily on commissions linked to sales performance, and introduce a minimum guaranteed salary. Prudential Life President and CEO Hiromitsu Tokumaru and two executives will voluntarily return 30 pct of their monthly remuneration for three months. END [Copyright The Jiji Press, Ltd.]
