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Editorial: Japan Post must investigate all questionable insurance to quell concerns

Those who thought that they could trust the post office must feel betrayed. Japan Post Insurance Co. and Japan Post Co., both of which are under the Japan Post Holdings umbrella, sold over 90,000 inappropriate contracts that were detrimental to its customers, it has emerged.

There were nearly 28,000 instances in which customers were charged twice when they switched insurance plans, or were advised to change to disadvantageous plans that had no economic rationale behind them.

There also were over 18,000 cases in which customers dissolved their contracts after being recommended by Japan Post Co. employees to do so, only to be prevented from entering into new contracts due to pre-existing conditions and ending up uninsured. Forcing a customer to switch to an unfavorable insurance plan is a violation of the Insurance Business Act.

The illicit activity that has emerged thus far has been limited to that for five years starting in April 2014, and the entire magnitude of the case will be revealed going forward. Japan Post Insurance Co. has not disclosed what will be subject to investigation by an external expert panel, but in order to alleviate customers' concerns, it will be necessary to check all insurance that is in any sort of doubt.

The biggest reason for the improper conduct was the weight that was placed on reaching quotas above all else at Japan Post, which had been commissioned by Japan Post Insurance to sell the insurance. In order to maintain the 360 billion yen or so annually in commissions that it received from Japan Post Insurance, Japan Post had its approximately 20,000 post offices nationwide compete against each other to see which post office could get the most number of new contracts.

Not only were Japan Post employees who sold numerous contracts paid extra, but in some cases, those who did not sell enough were penalized in the form of training sessions, or by being re-stationed to an area with fewer customers.

The malicious practice of charging customers double insurance premiums became widespread against a backdrop of an assessment criterion for Japan Post employees in which if the cancellation of an old contract was delayed by at least six months from the time of sale of a new contract, the exchange would count as the acquisition of a new contract, rather than a switch between contracts -- the former being more profitable for Japan Post employees.

This is the biggest scandal since the post office underwent privatization in 2007 and Japan Post Holdings was established. The post office's branding of safety and dependability has been deeply damaged.

This year, Japan Post Bank Co. was also found to have sold investment trusts to customers aged 70 and over using inappropriate tactics in many cases.

Japan Post Holdings Co.'s inadequate governance is a serious problem. This calls into question the principles behind postal privatization, which was trumpeted to lead to an improvement in customer service.

And yet, Japan Post Holdings President Masatsugu Nagato did not show up at a July 10 press conference regarding the misconduct. There is no denying that there's a lack of a sense of urgency or crisis at Japan Post.

Japan Post Holdings must root out its culture of illicit activity and beef up its governance if it is to realize true independent management that does not rely on the government's support.

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