LIFE INSURANCE BUSINESS IN JAPAN

Transcription

1 LIFE INSURANCE BUSINESS IN JAPAN The Life Insurance Association of Japan

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3 Contents 1. Summary of the Life Insurance Market in Fiscal a ) Insurance Business Results... 2 b ) Revenues and Expenditures... 7 c ) Assets... 9 d ) Liabilities and Net Assets e ) Member Companies and Sales Force Topics in Life Insurance Industry a) Revisions to the Insurance Business Act b) Introduction of Orderly Resolution Regime for Financial Institutions c) Reduction in the Standard Assumed Interest Rate d) New Insurance Products/Services and Solicitation Rules Our Activities a) Activities for Reflecting Consumers' Opinions b) Requests and Proposals to Parties Concerned c) Establishment of Appropriate Business Structure. and Ensuring Appropriate Payment of Benefits...19 d) Sharing of Initiatives by Life Insurance Companies for the Elderly e) Measures for Promoting the Simplicity and Clarity of Solicitation Materials f) Measures against Earthquake Disasters g) Activities for Clearly Disclosing Information h) Approach to Environmental Issues i ) Educational System j) Life Insurance Consultation Center k) Social Service Activities l) Measures against Moral Hazard m) LINC (The Life Insurance Network Center) Requests and Proposals a) Tax Reform b) IASB c) IAIS d) Others The Life Insurance Association of Japan () Organization Chart Board Members Member Companies Appendix I. Voluntary Guideline List II. Japan Institute of Life Insurance (JILI) III. Life Insurance Policyholders Protection Corporation of Japan (LIPPCJ)...43

4 1. Summary of the Life Insurance Market in Fiscal 2012 a) Insurance Business Results 1) Individual Insurance The number of new policies for individual insurance (including converted contracts) was million (121.3% y/y), and the amount of new policies (reflecting the net increase arising from the conversion) was 71,345 billion yen (108.8% y/y) for fiscal Among the number of new policies for individual insurance (excluding converted contracts), whole life insurance ranked top (30.57% of the total), followed by medical life insurance (24.47%), term insurance (14.42%), endowment insurance (11.91%) and cancer insurance (9.56%). The number of policies in force for individual insurance was million (106.9% y/y), and the amount of policies in force was 861,651 billion yen(99.6% y/y). Among the number of policies in force for individual insurance, whole life insurance ranked top (34.99% of the total), followed by medical life insurance (20.43%), cancer insurance (15.11%), term insurance (10.53%) and endowment insurance (9.21%). Table 1 New Policies and Policies in Force for Individual Insurance Fiscal Year New Policies (Number: million, Amount: billion yen, Y/Y: %) Policies in Force Number Amount Number Amount Y/Y Y/Y Y/Y Y/Y , , , , , , , , , , (Note)The number includes converted contracts, and the amount reflects the net increase arising from the conversion. 2

5 1. Summary of the Life Insurance Market in Fiscal 2012 Figure 1: Percentage Distribution of Individual Insurance by Type (Number of New Policies) Whole Life Insurance Term Insurance Endowment Medical Life Insurance Cancer Insurance Juvenile Insurance Others *Excluding converted contracts Figure 2: Percentage Distribution of Individual Insurance by Type (Number of Policies in Force) Whole Life Insurance Term Insurance Endowment Medical Life Insurance Cancer Insurance Juvenile Insurance Others *Excluding converted contracts 3

6 1. Summary of the Life Insurance Market in Fiscal ) Individual Annuity Insurance The number of new policies for individual annuity insurance (including converted contracts) was 1.65 million (103.9% y/y), and the amount of new policies (reflecting the net increase arising from the conversion) was 8,563 billion yen (108.4% y/y). Among the number of new policies for individual annuity insurance (excluding converted contracts), fixed individual annuity insurance accounted for 94.2% of the total and variable individual annuity insurance accounted for 5.8% of the total in fiscal The number and amount of policies in force for individual annuity insurance for this fiscal year were million (103.4% y/y) and 103,518 billion yen (104.7% y/y), respectively. Among the number of policies in force for individual annuity insurance, fixed individual annuity insurance accounted for 83.7% and variable individual annuity insurance for 16.3% of the total in fiscal Table 2 New Policies and Policies in Force for Individual Annuity Insurance Fiscal Year New Policies (Number: million, Amount: billion yen, Y/Y: %) Policies in Force Number Amount Number Amount Y/Y Y/Y Y/Y Y/Y , , , , , , , , , , *The number includes converted contracts, and the amount reflects the net increase arising from the conversion. 4

7 1. Summary of the Life Insurance Market in Fiscal 2012 Figure 3: Percentage Distribution of Individual Annuity Insurance by Type (Number of New Policies) 5.8 Fixed Annuity 94.2 Variable Annuity *Excluding converted contracts Figure 4: Percentage Distribution of Individual Annuity Insurance by Type (Number of Policies in Force) 16.3 Fixed Annuity 83.7 Variable Annuity *Excluding converted contracts 5

8 1. Summary of the Life Insurance Market in Fiscal ) Medical Insurance The number of policies in force for independent medical life insurance was million (108.8% y/y), and the amount of policies in force was 4,680 billion yen (99.0% y/y) for this fiscal year. The amount of policies in force for medical life insurance represents only the amount of death benefits and does not include the amount of benefits such as hospitalization benefits (for products without death benefits, while their number is included in the number of policies in force, the amount of benefits is not included in the amount). Many products these days limit the amount of death benefits while enhancing benefits for hospitalization and surgery. Therefore, even though the number of policies in force has increased, the amount of policies in force has decreased. In addition to independent medical life insurance policies, there are some types of medical insurance such as insurance policies with hospitalization and surgery riders (which provide medical benefits for hospitalization and surgery due to unforeseen accidents and sickness), and medical care insurance (which supplements the public medical insurance scheme with medical treatment benefits covering copayments in public medical insurance for hospitalization due to unforeseen accidents and disease). With respect to insurance policies with riders to individual life insurance and individual annuity, the number of policies with accidental hospitalization riders in force was million (102.0% y/y), those with sickness hospitalization riders in force was million (102.4% y/y), and those with surgical benefit riders in force was million (101.7% y/y). The number of policies in force for medical care insurance was 1.70 million (100.9% y/y). Table 3 Policies in Force for Medical Insurance Contracts (Number: million, Amount: billion yen, Y/Y: %) Fiscal Year Independent Medical Life Insurance Accidental Hospitalization Sickness Hospitalization Surgical Benefit Medical Care Insurance Number Amount Number Number Number Number , , , , , y/y (%)

9 1. Summary of the Life Insurance Market in Fiscal 2012 b) Revenues and Expenditures 1) Premium Income Total premium income was 37,140 billion yen (102.3% y/y). Among the premium income, individual insurance was 24,099 billion yen (106.0% y/y), individual annuity insurance was 4,374 billion yen (93.5% y/y), group insurance was 1,109 billion yen (99.6% y/y), and group annuity insurance was 3,683 billion yen (93.8% y/y). Table 4 Breakdown of Premium Income (billion yen) Fiscal Year Total Premium Income Individual Insurance Individual Annuities Group Insurance Group Annuities Others ,063 16,634 6,670 1,128 3,737 5, ,116 17,641 6,640 1,133 3,727 4, ,454 20,447 4,802 1,115 3,812 4, ,289 22,734 4,679 1,114 3,925 3, ,140 24,099 4,374 1,109 3,683 3,874 Y/Y (%) ) Investment Results The interest and dividends increased from the previous year to 6,475 billion yen (102.9% y/y), and the profits on asset management of special accounts also increased to 2,897 billion yen (513 billion yen in the previous year). Besides, the foreign exchange profit was 1,184 billion yen (81 billion yen in the previous year). The total investment income was 11,835 billion yen (145.4% y/y). The investment yield on assets in general accounts was 2.36%. The breakdown of items of assets is as follows: bonds (2.00%), foreign securities (5.25%), loans (2.18%), real estate (2.35%), and domestic stocks (0.61%). Table 5 Investment Income (billion yen) Fiscal Year Interest and Dividends Securities Loans Real Estate Others Profit on Sales of Securities Foreign Exchange Profit Others Total ,223 4,451 1, , , ,099 4,459 1, ,274 10, ,265 4,764 1, , , ,293 4, , , ,475 5, ,184 3,238 11,835 Y/Y (%) Table 6 Portfolio Yield Classified by Type of Asset (%) Fiscal Year General Account Assets Bonds Domestic Stocks Foreign Securities Loans Real Estate

10 1. Summary of the Life Insurance Market in Fiscal ) Insurance Benefits Paid The total amount paid by all life insurance companies under life insurance contracts in fiscal 2012 was 31,685 billion yen (101.5% y/y). Among the amount of insurance benefits paid, claims paid amounted to 15,296 billion yen (94.8% y/y), annuities paid amounted to 3,360 billion yen (107.2% y/y), and benefits amounted to 3,936 billion yen (103.5% y/y). Table 7 Breakdown of Insurance Benefits Paid (billion yen) Fiscal Year Insurance Benefits Paid a Claims Paid Annuities Paid Benefits ,818 19,965 2,351 4, ,681 18,829 2,558 4, ,049 17,243 2,876 3, ,208 16,143 3,134 3, ,685 15,296 3,360 3,936 Y/Y (%) a. Including others 4) Basic Profit and Ordinary Profit The basic profit of member companies, which represents the profitability of the life insurance business for fiscal 2012, was 3,259 billion yen (106.0% y/y). Ordinary profit was 2,564 billion yen (99.2% y/y). Table 8 Basic Profit and Ordinary Profit (billion yen) Fiscal Year Basic Profit* Ordinary Profit , ,848 1, ,628 1, ,074 2, ,259 2,564 Y/Y (%) *Basic Profit = Ordinary Profit - Capital Gain/Loss - Nonrecurring Income/Loss 8

11 1. Summary of the Life Insurance Market in Fiscal 2012 c) Assets As of the end of fiscal 2012, total assets stood at 344,998 billion yen (105.5% y/y). Among the items, securities accounted for 80.7% of the total assets (278,244 billion yen, 108.0% y/y) followed by loans accounting for 11.7% of the total (40,244 billion yen, 95.4% y/y). Among securities items, Japanese government bonds ranked top with 148,769 billion yen (105.3% y/y) accounting for 53.5% of the total securities, followed by foreign securities at 55,986 billion yen (119.3% y/y), corporate bonds at 25,155 billion yen (99.3% y/y), stocks at 16,725 billion yen (113.4% y/y) and local government bonds at 13,934 billion yen (105.9% y/y). Bonds (total of government bonds, local government bonds and corporate bonds) are tending to increase (187,858 billion yen, 104.5% y/y). Among the amount of total assets, bonds accounted for 54.5%, foreign securities for 16.2%, and stocks for 4.8% of the total in fiscal Table 9 Breakdown of Assets (Amount: billion yen, Ratio:%) Fiscal Year Cash/Deposits Call Loans Monetary Trust Securities Ratio Ratio Ratio Ratio , , , , , , , , , , , , , , , , , , , , Y/Y (%) (Continued) Fiscal Year Tangible Fixed Loans Others Assets Ratio Ratio Ratio Total Assets , , , , , , , , , , , , , , , , , , , ,998 Y/Y (%) Table 10 Breakdown of Securities (Amount: billion yen, Ratio:%) Local Government Fiscal Government Bonds Corporate Bonds Stocks Bonds Year Ratio Ratio Ratio Ratio , , , , , , , , , , , , , , , , , , , , Y/Y (%) (Continued) Fiscal Foreign Securities Other Securities Bonds a Stocks Year Ratio Ratio Ratio Ratio , , , , , , , , , , , , , , , , , , , , Y/Y (%) a. Including national government bonds, local government bonds, corporate bonds and other foreign securities 9

12 1. Summary of the Life Insurance Market in Fiscal 2012 d) Liabilities and Net Assets Total liabilities stood at 328,673 billion yen (104.2% y/y) as of the end of fiscal 2012, accounting for 95.3% of the total of liabilities and net assets. Meanwhile, total net assets were 16,324 billion yen (142.2% y/y), accounting for 4.7% of the total of liabilities and net assets. Table 11 Liabilities and Net Assets (billion yen) Fiscal Year Liabilities a Insurance Reserves Price Fluctuation Reserves Net Assets , ,133 1,374 6, , ,202 1,461 10, , ,379 1,500 9, , ,683 1,679 11, , ,433 2,127 16,324 Y/Y (%) a. Including others e) Member Companies and Sales Force The number of member companies, which are all life insurers operating in Japan, stood at 43 as of the end of December 2013 including 5 mutual insurers. The number of member companies with foreign participation stood at 18 as of the end of December 2013, composed of 15 domestic companies with foreign capital and 3 branch offices of foreign companies. The number of tied sales agents decreased from the previous year to 233 thousand (98.7% y/y), and also the number of agencies decreased from the previous year. Meanwhile, the number of sales representatives at agencies has continued to increase since the lifting of the ban on bancassurance in fiscal 2002, rising to 1,011 thousand (100.6% y/y). Table 12 Number of Member Companies and Agents/Agencies Fiscal Member Number of Sales Force (in thousands) Year Companies* Tied Agents Agencies Sales Reps at Agencies (35) (40) (41) (38) , (38) ,011 *Numbers in parentheses are those of stock companies. As of the end of the fiscal year. Reference: Member Companies with Foreign Participation* (As of the end of December 2013) Domestic Companies with Foreign Capital Branch Offices of Foreign Companies AEGON Sony Life Crédit Agricole Life Manulife Life Prudential Life Aflac Allianz Life AIG Fuji Life MassMutual Life Prudential Gibraltar Financial Life Cardif Assurance Vie AXA Life Hartford Life PCA Life MetLife Alico Zurich Life AXA Direct Life ING Life Gibraltar Life *Foreign stake of 50% or more 10

13 2. Topics in Life Insurance Industry a) Revisions to the Insurance Business Act With the aim of developing the environment to help enhance the international competitiveness of Japanese insurers and promote business restructuring while protecting policyholders, partial revisions were made to the Insurance Business Act as of March 31, 2012, including reviewing the regulation on the scope of business of subsidiary companies of acquired foreign insurance companies and extending the period of availability of the government subsidy to Life Insurance Policyholders Protection Corporation of Japan. In addition, the regulations on asset investment ratio were abolished followed by the revisions of the Ordinance for Enforcement of the Insurance Business Act in April ) Revision of regulation on the scope of business of subsidiary companies of acquired foreign insurance companies Under the former regulation, only certain types of companies were eligible to be held as subsidiary companies such as insurance companies, banks and insurance companies operating business in foreign jurisdictions. As a result, some Japanese insurance companies had to set conditions to dispose of companies that could not be held as subsidiary companies when acquiring an insurance company in foreign jurisdictions, thus making it hard for Japanese companies to enter overseas markets. The revised regulation allows Japanese insurance companies to hold subsidiary companies of acquired insurance companies in foreign jurisdictions, which are ineligible to be held as subsidiary companies, within a certain period (5 years) in principle. Moreover, if disposal of the companies within a certain period is hindered, there are exceptions where Japanese insurance companies are allowed to hold the subsidiary companies beyond the period under certain conditions with the approval of the FSA. 2) Revision of regulation on transfer of insurance contracts Under the former regulation, it was specified that "a transfer of insurance contracts shall cover the insurance contracts comprehensively for which the policy reserve is calculated on the same basis" when transferring insurance contracts to another insurance company (i.e. administrative approval). This regulation restricted to some degree the transfer of insurance contracts, thus hampering the restructuring of an insurance company depending on the characteristics of customers and distribution channels. While maintaining the administrative approval on the transfer of insurance contracts, the revised regulation abolishes the regulation on the transfer unit of insurance contracts after taking required measures (e.g. enhancing information provision and reviewing the requirements for sustaining objections) to ensure fairness among and the protection of policyholders. 11

14 2. Topics in Life Insurance Industry 3) Abolition of regulation on suspension of conclusion of insurance contracts The former regulation specified that "the transferor company shall not conclude any insurance contract that belongs to the same class as the insurance contracts to be transferred, for the period ranging from the time of adoption of the resolution to the time of execution or renunciation of the transfer of insurance contracts (regulation on suspension of conclusion of insurance contracts)". However, it was pointed out that, in case where an insurance company transfers the insurance contracts on the premise of continuing the business such as where a branch office in Japan of a foreign insurer becomes locally incorporated, this regulation may hinder certain procedures such as renewal of insurance contracts, and thus be inconvenient to policyholders. The revised regulation abolishes the regulation on suspension of conclusion of insurance contracts, while imposing an obligation on insurance companies to obtain the consent of policyholders for the transfer of insurance contracts to the transferee company in case when they conduct insurance solicitation activities for insurance contracts to be transferred during the period of the transfer of insurance contracts. 4) Extension of period of availability of government subsidy to Life Insurance Policyholders Protection Corporation of Japan Under the former regulation, a government subsidy was available for Life Insurance Policyholders Protection Corporation of Japan (LIPPCJ) to provide financial aid to insolvent life insurers under certain conditions, in case the ceiling on industry contributions could not cover the full amount of financial assistance for bankruptcy of life insurers, until the end of March However, taking into account the impacts of the Great East Japan Earthquake and the confusion in the global financial and capital markets since the European sovereign-debt crisis, it was revised to extend the availability of the government subsidy for another 5 years in order to ensure sufficient protection for policyholders. (Refer to page 43 to 45, Annex III for the summary of LIPPCJ.) Accumulation limit 400 billion 16.2 billion (As of the end of March 2011) 0 Borrowing limit 460 billion 40 billion each year (Accumulated until 2020 under the current system) Accumulation Borrowing (Government-guaranteed loans are available) (Government subsidy is available) Extend availability period from March 2012 to March ) Abolition of regulation on asset investment ratio There had been a regulation on the asset investment ratio which set ceilings on each type of assets to be hold by insurance companies calculated by multiplying total assets by a certain ratio (e.g. 30% for domestic stocks, 30% for foreign currency-dominated assets, and 20% for real estate), known as "3-3-2 rules". However, this regulation is abolished in accordance with the partial revision to the Ordinance for Enforcement of the Insurance Business Act as of April 18,

15 2. Topics in Life Insurance Industry b) Introduction of Orderly Resolution Regime for Financial Institutions The global financial crisis triggered by the failure of Lehman Brothers clarified that there is a potential risk that distress and failure of systemically important financial institutions may spread across financial markets and cause a serious impact on the real economy. In response, a framework for new effective orderly resolution regimes for financial institutions has been discussed internationally, and the FSB paper "Key Attributes of Effective Resolution Regimes for Financial Institutions" was published and endorsed by the G20 member countries at the Cannes Summit in November Reflecting these global trends, the Act for Partial Revision to the Financial Instruments and Exchange Act was enacted, and the Deposit Insurance Act was revised as of June 12, 2013 to introduce a new orderly resolution regime for financial institutions. The framework of the regime is as follows. Scope Financial institutions including depositary financial institutions, insurance companies, financial instruments business operators, financial holding companies. Procedure and condition for initiating the orderly resolution regime for financial institutions The Prime Minister declares and confirms the need to implement the orderly resolution regime for financial institutions, following deliberations by the Financial Crisis Response Council, when it is considered necessary to prevent significant disruptions to the market. Resolution Measures Oversight by the Deposit Insurance Corporation of Japan (DICJ) Provision of liquidity and financial assistance *Capital injection may be undertaken as necessary provided the financial institutions are not insolvent. The measures reduce market transactions, while ensuring the performance and continuation of obligations which are critical for stabilization of the financial system, thereby achieving orderly resolution of financial institutions and preventing severe disruption to the market. (Note) When the measures above are implemented, contractual bail-in options (writing down of unsecured debts or converting unsecured debts into equity) are exercised. Funding The government provides guarantees for the DICJ's funding. However, if losses are incurred, in principle the expenses need to be borne ex post by the financial industry's participants. The government may provide financial support in exceptional cases. The DICJ shall record its expenses in the Crisis Management Account. Business in Japan 2012/

16 2. Topics in Life Insurance Industry c) Reduction in the Standard Assumed Interest Rate The standard policy reserve is introduced as the standard level for accumulating policy reserves in accordance with the revision of the Insurance Business Act in 1996 to ensure the soundness of life insurance companies, and life insurance companies are required not to fall below the amount of the standard policy reserve for a certain type of insurance contracts. Under this standard policy reserve regime, the assumed interest rate used for calculating the standard policy reserve (hereinafter referred to as "standard assumed interest rate") is prescribed, for which the calculation method is specified in a public notice of the Ministry of Finance. In April 2013, the FSA reduced the standard assumed interest rate for the first time in 12 years. This is because Japan has been in an excessively low-interest rate environment for about two decades, and the 10-year JGB yield used to calculate the standard assumed interest rate has remained at a low level for a long time. The standard assumed interest rate which is applied to insurance contracts concluded on or after April 1, 2013 is reduced from 1.5% to 1.0%. d) New Insurance Products/Services and Solicitation Rules Along with the changes in social conditions in Japan, such as the declining birthrate and rapidly aging population, the people's needs for insurance products and services are changing. The distribution channels are also changing and becoming diverse, including large-scale insurance agencies. Responding to these changes, the "Working Group on the Provision of Insurance Products/Services" was established within the Financial System Council to deliberate the modalities for insurance products and services as well as the rules and regulations relating to solicitation and sales of insurance products. Based on these deliberations, the Working Group compiled and published a report entitled "New Insurance Products/Services and Solicitation Rules" on June 7, A summary of the report is as follows: New insurance products/services In line with the changes in social conditions such as the declining birthrate and aging population, the needs and expectations of the public towards the insurance products and services of insurance companies and groups are changing; therefore, the following revisions should be made to address these new needs. Development of new types of insurance products Fertility treatment insurance Direct benefit payment to service providers Expansion of business scope of insurance companies/groups Lifting of ban on the operation of nursery schools by subsidiaries Rules and regulations regarding insurance solicitation/sales The distribution channels of life insurance products have become diverse. Sales of insurance at banks, at walk-in insurance shops and via the internet have been increasing, and also insurance agencies are expanding in size. Therefore, the following revisions should be made to deal with the changes in insurance solicitation. Creation of basic rules for insurance solicitation Introduction of obligation to ascertain the customer's wishes Clearly spell out general principles for proposing products in accordance with the customer's wishes. Legal obligation to provide information Make it mandatory to offer explanations on product information during insurance solicitation under laws and regulations. Simplification of solicitation documents (voluntary efforts by the insurance industry) Make solicitation documents easier for subscribing customers to understand by omitting unnecessary information. 14

17 2. Topics in Life Insurance Industry Obligations of insurance solicitors Introduction of obligation for insurance solicitors to develop/reinforce legal compliance regimes Make it mandatory for insurance agencies themselves to develop legal/regulatory compliance regimes. Revision of regulations concerning agencies for multiple insurance companies Require agencies to provide justifications clearly for presenting and recommending a specific product when comparing the products of multiple insurance companies. Insurance solicitors' responsibility to manage subcontractors Require insurance agencies to properly manage their subcontractors, as is required for insurers. Scope of applicability of solicitation regulations Restructuring/clarification of the scope of applicability of solicitation regulations Restructure and clarify the scope of applicability of solicitation regulations in line with the diversification of solicitation processes, such as the emergence of comparison websites and referral services of potential clients. Review of regulations pertaining to insurance brokers Simplification of contract procedures, and reduction in the level of minimum security deposit required. The Report asks the relevant authorities and related parties in the insurance industry to reinforce and develop relevant regimes based on the discussions in the Report and to promote financial education in order to help consumers obtain a certain level of knowledge on insurance. 15

18 3. Our Activities a) Activities for Reflecting Consumers' Opinions The is conducting the following activities in order to promote the better management of life insurance companies from the standpoint of consumers by feeding back consumers' opinions to the companies. 1) Holding Interactive Dialogues on Life Insurance The holds the "Interactive Dialogue on Life Insurance" in cooperation with the Japan Institute of Life Insurance (JILI, see page 42) and local offices, with the aim of promoting a proper understanding of the life insurance business. In fiscal 2012, the held 116 meetings in total with consumers' groups/organizations and journalists. In the meetings, there was positive feedback on the efforts made by the life insurance companies and the in the aftermath of the Great East Japan Earthquake, as well as a number of comments on the industry's initiatives for the elderly. Also, the periodically visits consumer organizations to provide information or to hear their opinions on the life insurance industry and the 's activities. 2) Operating the Secretariat of Consumers' Opinions With the aim of reflecting consumers' opinions in the business management of life insurance companies, the operates the Secretariat of Consumers' Opinions, which collects and analyzes information such as on counseling or complaints, as well as opinions or requests from consumers received by the and opinions of outside experts received at the Arbitration Advisory Committee (see page 27), and then shares the information with member companies. The Secretariat also exchanges information on specific best practices of member companies and on findings from their actual business. Mechanism for reflecting consumers' opinions in the business management of life insurers Arbitration Council Arbitration Advisory Council Consumers Opinions Life Insurance Consultation Center Comments/ Proposals Secretariat of Information sharing Secretariat of Consumers Opinions Cross-sectoral body within the secretariat of Collect and analyze consumers opinions Japan Institution of Life Insurance Report Consultation Center Council Members: Responsible officers for consultation Exchanging information about complaints Sharing best practices Committees Members: Directors and senior managers Sharing information Discussing measures if needed Reflect in the business management 16

19 3. Our Activities b) Requests and Proposals to Parties Concerned The submits various requests and proposals to the parties concerned in order to promote the sound development of the life insurance industry and maintain its reliability (refer to page 31 to 34 for details). 1) Request on Tax Reform and PR Campaign regarding the New Tax Deduction Scheme for Life Insurance Premiums The made requests to maintain and expand the exemption of inheritance tax on death benefits in the 2013 tax reform. Since the private sector is playing an increasing important role in complementing the public sector in providing life security, the will continuously make requests for tax incentives from the standpoint of policyholders. At the same time, with regard to the new tax deduction scheme for life insurance premiums that came into effect on January 1, 2012, which provides tax deductions for long-term care/medical insurance additionally, the is conducting a PR campaign of this new scheme through newspaper ads and its website. 2) Approach to Postal Privatization Issues The revised Postal Service Privatization Act was enforced in April 2012, and the privatization process is under way in the Japan Post Group. The considers that it is not acceptable to increase the amount limit and business scope of Japan Post Insurance without "ensuring a level playing field" and without "preparing an appropriate system" including on underwriting and insurance payouts. Therefore, the continues to express these concerns to the parties concerned when appropriate. 3) Request on Utilization of Number System Legislative bills were enacted on 24 May, 2013 for introducing an identification numbering system to facilitate the management of personal information for taxation and social security purposes. With regard to expansion of the use of the system to the private sector, discussions will be made three years after the laws are enforced (scheduled in the fall of 2015), considering the progress on implementation of the laws. If expansion to the private sector is considered reasonable, the necessary measures will be taken while obtaining consensus from the general public. The considers that utilization of this network system for the life insurance industry would enhance the convenience of policyholders, the efficiency of the life insurance industry, and all administrative matters such as ensuring prompt payment of insurance benefits both in case of disaster and in ordinary times; therefore, the is requesting that life insurers be allowed to use the network system at an early stage. 17

20 3. Our Activities 4) Request on International Regulations and Accounting Standards (see page 32 to 33) Amid the ongoing globalization of the insurance industry, the submits various comments to international organizations including the International Association of Insurance Supervisors (IAIS) and the International Accounting Standards Board (IASB) in order to appropriately reflect the characteristics of the life insurance business in Japan. Moreover, the continuously follows up the implementation of the Foreign Account Tax Compliance Act (FATCA) in U.S. and the discussions on the global standard for automatic exchange of financial account information prepared by the Organisation for Economic Co-operation and Development (OECD), and will urge the parties concerned to appropriately reflect the characteristics of the life insurance business when appropriate. In order to strengthen the voice of the insurance industry, the is stepping up cooperation with insurance associations in other jurisdictions by joining the Global Federation of Insurance Associations (GFIA) which was established in October About the Global Federation of Insurance Associations (GFIA) The GFIA is a non-profit association established to represent national and regional insurance associations. Currently, its 37 member associations represent insurers that account for around 87% of total insurance premiums worldwide. 5) Enhancement of Stock Valuations The conducts questionnaire surveys of listed companies and institutional investors and analyzes settlement data. The collects and publishes its requests from the position of shareholders and institutional investors on improvements and ways to enhance stock valuations. In March 2013, the published its requests on the setting and announcement of business objectives, the enhancement of shareholder returns, and the improvement of corporate governance. 18

21 3. Our Activities c) Establishment of Appropriate Business Structure and Ensuring Appropriate Payment of Benefits The and member companies are making the following efforts to fulfill the roles and social mission of the life insurance industry such as the payment of insurance benefits by ensuring that businesses are managed in the interest of policyholders. 1) Development of Voluntary Guidelines (see page 41, Annex I) To enable life insurers to provide appropriate handling and best services for policyholders, from arranging the contract to the payment of benefits, the has prepared voluntary guidelines which include practical transactions and points to consider. These guidelines are referred to by each member company and their executives and regular employees, and are periodically reviewed by the. Last year, the revised particular guidelines (Guidelines for Appropriate Representation of Life Insurance Products, Guidelines for Policy Overview, Guidelines for Warning Information, and Guidelines for Pre-contract Documentation) in accordance with the findings from the compiled measures for promoting the simplicity and clarity of solicitation materials, in order to make solicitation materials simpler and easier to understand. 2) Collection and Sharing of Best Practices The monitors the measures taken by member companies in accordance with the voluntary guidelines on a regular basis, once a year in principle. The collects examples of practices adopted by member companies to improve customer services including measures reflecting the opinions and requests from consumers, and shares the information with all member companies to promote the application of guidelines in the management of the companies. 3) Development of Manual for Earthquakes and for New Strains of Influenza To fulfill the social mission of the life insurance industry, the takes several measures to continue its important business such as payment of insurance benefits, even in extraordinary situations such as a serious disaster or a pandemic of a new strain of influenza. The also revised the manual for earthquakes in light of the lessons learnt from the Great East Japan Earthquake as well as the manual for new strains of influenza in response to the government's development of an action plan for new strains of influenza. 4) Activities as Authorized Personal Information Protection Organization The was accredited as an Authorized Personal Information Protection Organization by the Financial Services Agency under the Act on the Protection of Personal Information in April The developed the Personal Information Protection Guidelines and provides guidance or recommendations on complying with the guidelines to each member company, and also receives related complaints from customers and shares them with member companies. 19

22 3. Our Activities d) Sharing of Initiatives by Life Insurance Companies for the Elderly Due to the sharp increase of the elderly population in Japan, life insurance companies are required to improve their customer service giving consideration to the characteristics of the elderly. In this regard, the utilizes comments received at the Interactive Dialogue on Life Insurance, and shares information on specific best practices of member companies collected by the Secretariat of Consumers' Opinions. Furthermore, the released the report "Life Insurance Services in a Super Aged Society - Better Serving the Elderly" in June 2013 to support the initiatives by life insurance companies for ensuring customer services giving consideration to the characteristics of the elderly. The Report was compiled based on the aging of the population and the lessons learnt from experience after the Great East Japan Earthquake, as well as in accordance with the discussions on the "Improvement of financial services in the aging society" in the Public-Private Financial Roundtable. The Report clarifies the challenges for life insurance companies to better serve the elderly in each situation (for example, at the time of concluding contracts or the payment of insurance benefits), and shares initiatives by the life insurance companies giving consideration to the characteristics of the elderly. Key Points of the Report The clarified the challenges for life insurance companies in providing services to existing elderly policyholders and in the sale of insurance to the elderly, and shares the examples of initiatives by life insurance companies to improve their services to the elderly. In providing services to existing elderly policyholders, the Report compiled the initiatives by life insurance companies, clarifying challenges from the following three perspectives: risks to secure and prompt handling procedures for insurance contracts (procedural risks), prevention of procedural risks, and customer services with special attention to the elderly. In the sale of insurance to the elderly, the Report compiled the initiatives by life insurance companies, clarifying challenges from the following three perspectives: clear explanation during solicitation, adaptation to elderly customers living alone, and customer services with special attention to the elderly. Life insurance companies must make continuous efforts to serve the elderly better by sharing and utilizing the initiatives by the companies from the perspective stated above both in providing services to existing elderly policyholders and in the sale of insurance to the elderly. 20

23 3. Our Activities e) Measures for Promoting the Simplicity and Clarity of Solicitation Materials The is striving to improve the simplicity and clarity of solicitation materials as a whole industry, such as limiting the volume of information in order to prevent customers from losing motivation to understand the solicitation materials. The compiled and released "Measures for Promoting Simplicity and Clarity of Solicitation Materials", taking into account the comments of external experts and external consulting firms and the issues found in analyzing the solicitation materials of each member company in order to make solicitation materials simpler and easier to understand in line with the awareness of the "Working Group on the Provision of Insurance Products/Services" of the Financial System Council (see page 14). Each member company will take action to make their solicitation materials simpler and easier to understand for their customers by referring to the guidelines and the list of indicators, and the will follow up the progress of such action. Key Points of Measures for Promoting the Simplicity and Clarity of Solicitation Materials Development of basic policy for the Policy Overview and Warning Information Development of the list of indicators for customer-friendly solicitation materials (i.e. easy to view, read and understand) Review and clarification of items described in the Guidelines for Policy Overview and for Warning Information (i.e. revision of the voluntary guidelines) Establishment of intensive follow-up period (for about 3 years) to promote measures by each member company 21

24 3. Our Activities f) Measures against Earthquake Disasters 1) Measures by the Life Insurance Industry for Victims In the wake of the Great East Japan Earthquake, the life insurance industry has worked hard to complete the prompt payment of insurance benefits for all customers, with the fundamental policy of "taking actions giving utmost consideration to affected people to provide them peace of mind as soon as possible". In recognition of its valuable response to the Great East Japan Earthquake, the received the "2012 State Minister's commendation for contributors to consumer support" in May Provision of assistance to the victims for their livelihoods and peace of mind Inquiry system regarding insurance contracts/ Simple procedures for insurance claims Approach to ensure payment of insurance benefits Major Measures by the and Member Companies Donations Non-application of the earthquake exclusion clauses Extension of the grace period for premium payments Simple and prompt payment of insurance benefits Consultation at the Life Insurance Consultation Center Development of guidelines for the payment of insurance claims and benefits Establishment of the Center for Searching for Life Insurance Contracts in Disaster Areas Establishment of an industry-wide database Simple and prompt treatment regarding procedures for death notification for the missing Establishment of the Life Insurance Support Network for Orphaned Minors About the Center for Searching for Life Insurance Contracts in Disaster Areas Under this search system, all member companies investigate any relevant insurance contracts for people who have difficulties in claiming insurance benefits because they lost any evidence of the insurance contracts due to a disaster. Currently, the scope of this system has been expanded to any cases where people lost any evidence of insurance contracts in an area covered by the Disaster Relief Act because their home was either washed away or burned down in the wake of a typhoon, etc. 2) Sharing Measures against the Great East Japan Earthquake Over two years have passed since the Great East Japan Earthquake, and the has compiled details of the measures taken by member companies so far, and shared them among the companies in order to utilize the lessons learned for the operation of their life insurance business. In addition, the shared information on the revisions made by member companies to their Business Continuity Plans (BCP) and administrative procedures/services in response to the earthquake. The life insurance companies are striving to enhance their customer services by reflecting the shared information in their disaster contingency planning in ordinary situations and also their responses to future disasters. 22

25 3. Our Activities g) Activities for Clearly Disclosing Information 1) Basic Explanation about Life Insurance The posts basic life insurance information and knowledge on its website. The contents systematically cover various topics such as "What is life insurance?", "The mechanism of life insurance", "The mechanism for calculating insurance premiums and insurance dividends" and so on. 2) Quick Search for Life Insurance Products The operates a "Quick Search for Life Insurance Products" on its website so that customers can gather necessary information on the life insurance products of life insurers. This is linked to product descriptions of life insurers on their websites so that customers can find more details about the products. 3) Disclosure of Complaint Information To help make customers aware of how member companies address their complaints, the discloses information including the number and details of complaints as well as those of payment/non-payment for insurance claims on the 's and member companies' websites. 4) Setting of Standards for Disclosure The Insurance Business Act and other related laws stipulate detailed items to be disclosed by life insurers. The has also prepared a set of industry-wide "Standards for Disclosure" with additional items that it considers should be voluntarily added by member companies. The reviews these standards every year for possible improvement. In addition, it has prepared a guidebook on disclosure by life insurers to help customers understand, because the financial statements of life insurers vary significantly from those in other industries. 5) Publication of a Summary of Life Insurance Statistics The collects the statistics of the life insurance business of all life insurers monthly, quarterly, in the first half year, and annually, and publishes these on its website. In addition, the prepares and publishes "Life Insurance Fact Book" which summarizes the life insurers' key performance and the business results of the life insurance industry, and "Statistical Data Package of Life Insurance Market in Japan" which contains detailed statistical data of life insurers. h) Approach to Environmental Issues The has committed itself to the "Nippon Keidanren's Commitment to a Low Carbon Society" and developed "Action Guidelines for Environmental Issues" and "Life Insurance Industry's Commitment to a Low Carbon Society". Also, the conducts a "Follow-up Survey of Voluntary Action Plans on the Environment" every year and verifies member companies' actions concerning environmental issues. The life insurance industry has committed to reducing electricity consumption in headquarters buildings by 2% from the fiscal 2006 level (estimated to be about 17% from the fiscal 2000 level) on average for the period from fiscal 2008 to The has also set the target that electricity consumption per unit floor area should not exceed the level in fiscal In March 2013, the set the reduction target for the year 2020 of "reducing electricity consumption per unit floor area of buildings by an average of 1% per year compared to fiscal 2009", and is currently working toward the target. 23

26 3. Our Activities i) Educational System 1) Common-to-Industry Educational System for Life Insurance Solicitors Under the laws and regulations, tied sales agents and sales representatives at agencies need to be registered with the FSA to sell life insurance products as life insurance solicitors. The administers the "General Course Exam" to check the knowledge, quality and capacity of candidates required for their registration. The also operates the examination system for the "Professional Course", "Advanced Professional Course" and "College Course" in order to enhance the abilities of solicitors to provide better services to customers. In addition, the administers the "Variable Life Insurance Sales Qualification Course Exam" for insurance solicitors to sell variable life insurance/annuities. The reviews and enhances the content of the textbooks for those examinations every year. Chart of Common-to-industry Educational System Initial 3-month training period (In total 15 days, 45 subjects, 60 hours) Orientation (more than 1 day) Initiation Pre-registration training (Min. 8 days, 30 subjects, 32 hours) Training for Professional Course Exam (2 days, 12 hours or more) Training for Variable Life Insurance Sales Qualification Exam (2 days, 10 hours or more) Variable Life Insurance Sales Qualification Exam Pass Registration () General Course Exam Pass Registration (Regional Finance Bureau) Professional Course Exam Pass Life Consultant Advanced Professional Course Exam Pass College Course Exam Pass Post-registration training period (Min. 7 days, 15 subjects, 28 hours) Senior Life Consultant Total Lif e Consultant OJT (1 month after registration) Purpose and Summary of Each Course Course Purpose Description General Course To gain a basic knowledge on life insurance required by a tied Compliance at the time of soliciting insurance sales agent/sales rep at an agency. Importance of maintenance and services after sales Professional Course To acquire more extensive expertise and related knowledge on insurance solicitation based on the core knowledge gained in the General Course. Knowledge about other financial sectors Social security and corporate benefit system Advanced Professional Course College Course Variable Life Insurance Sales Qualification Course To acquire relevant practical knowledge essential for financial planning services. To acquire further expertise on life insurance and related knowledge at a professional level. This course is the highest course in the common-to-industry educational system. To acquire knowledge on the characteristics and mechanisms of variable products. Categories of tax and its calculation Public pension program Financial planning Study on corporate insurance products Types of variable life insurance and its mechanism Prohibited matters and issues in soliciting variable products 24

27 3. Our Activities 2) Continuing Education System The has a system for continuous education of all life insurance solicitors once a year in principle so that they can conduct solicitation activities with an emphasis on customer satisfaction and compliance. The also conducts follow-up activities every year to enhance the continuing education system. 3) Life Insurance Course This course is for staff engaged in the life insurance business, with the aim of imparting the basic knowledge required to work in the life insurance industry. The course consists of eight subjects: "Introduction to Life Insurance", "Life Insurance Actuarial Science", "Risk Selection", "Contractual Provision and Law", "Life Insurance Products and Sales", "Life Insurance Accounting", "Asset Management" and "Life Insurance and Tax Law". The publishes the text and operates the exam for each subject. 4) Examination for Life Insurance Interviewers When an applicant applies for a contract, whether to accept the contract is judged based on the declaration form or a doctor's assessment. As a way of judging contracts, the life insurance interviewer interviews the insured and checks their health. The administers its approved examination. 5) Examination for Life Insurance Claims Assessors The has been conducting the "Exam for Life Insurance Claims Assessors" since fiscal This exam encourages applicants to acquire the basic knowledge and good judgment required by those in charge of examining claims at life insurers. This exam helps to foster such human resources and to maintain and improve their abilities. 25

28 3. Our Activities j) Life Insurance Consultation Center The was designated by the FSA as a designated dispute resolution body based on the Insurance Business Act, and therefore handles complaints and resolves disputes related to life insurance business and foreign life insurance business. In order to conduct those activities, the Life Insurance Consultation Center was established within the. The Center aims at raising public understanding of and trust in life insurance as well as helping protect policyholders' legitimate interests. The Center implements proceedings promptly and transparently from a neutral and fair position upon receiving an inquiry or complaint about life insurance or an application for dispute resolution procedures. The Center operates its services based on the "Operational Rules for a Designated Dispute Resolution Body for (foreign) Life Insurance Business" which was designated by the FSA. 1) Appropriate Handling of Inquiries and Complaints Received In the Life Insurance Consultation Center (including its local branches in every prefecture), expert consultants deal with inquiries and complaints from a neutral position. When the Center receives a request to resolve a complaint, it strives to reach an early settlement such as by making requests for a settlement and by mediating settlements with the life insurers involved. Number of inquiries and complaints Fiscal 2011 Fiscal 2012 General Inquiries 9,593 7,437 Complaints 6,458 5,697 Total 16,051 13,134 2) Provision of Information regarding Consultations and Complaints To help prevent disputes and their recurrence, the Center publishes the annual "Life Insurance Consultation Center Report" and "Overview of Arbitration", which summarizes the inquiries and complaints received during the year such as the number and content, and also publishes the quarterly "Voice Report" which provides details of the inquiries and complaints that have been settled in the past three months. In addition, the discloses the number of complaints by company on its website to ensure the transparency of the complaint handling process. The releases information on its current activities and its future plans as a designated dispute resolution body to continuously enhance the convenience of users. 26

29 3. Our Activities 3) Operation of Arbitration Council When a customer files a complaint with the Center, the Center arranges the negotiation between the life insurer involved and the customer to reach a settlement. In principle, if they cannot reach a settlement within one month, the Center convenes the Arbitration Council to resolve the dispute. The Arbitration Council consists of 10 members (4 lawyers, 4 consumer advisors and 2 staff of the Life Insurance Consultation Center) and strives to achieve an appropriate resolution of the dispute. Flow of Procedure to Apply for the Arbitration Council Filing of Complaint Receive complaint Dispute unresolved Arrange negotiation Settlement reached Settlement reached Judging of appropriateness Fact-finding through documents, hearings, etc. Deliberation Preparation/ presentation of settlement proposal Arbitration unsuccessful Refusal Arbitration Council Arbitration completed by ruling Number of Filings for Procedures of the Arbitration Council FY Total Number ) Establishment of Arbitration Advisory Committee The Life Insurance Consultation Center established the Arbitration Advisory Committee consisting of external experts such as scholars, lawyers and doctors, representatives of consumer organizations and full-time executives of the. In addition to responding to consultations by the Head of the Life Insurance Consultation Center (Chairman of the ), the Arbitration Advisory Committee makes recommendations and proposals, as appropriate, to ensure fair and smooth operation of the Center's business and the Arbitration Council. The Center has a system for reflecting those recommendations and proposals in the measures of the and member companies. 27

30 3. Our Activities k) Social Service Activities The conducts the following projects to contribute to society and improve the daily lives of people and social welfare centering on the life insurance industry's ideal of "Spirit of Social Assistance". 1) Activities to Enhance Family Bonds by Reading Picture Books to Children Recently, although people tend to value the family which is the basis of the life insurance business, many parents are worried about how to raise their children. Therefore, the has engaged in "Activities to Enhance Family Bonds by Reading Picture Books to Children" since fiscal In fiscal 2011, the started to support the holding of the "JPIC Workshop for the Supporters of Reading Picture Books" and "JBBY Workshop on Children's Books". Through these workshops for reading picture books, the is providing opportunities for people to spend time with their families. In fiscal 2012, there were 1,917 participants in total from 23 regions at the workshops. The encourages the participants to hold sessions for reading picture books based on what they learned at the workshops, and provides the set of books for the sessions. In fiscal 2012, the also held a session for reading picture books by the author of the books as a part of the Great East Japan Earthquake victim support activities. 2) Activities to Enhance Family and Community Bonds through Environmental Education Covering the schoolyards of elementary and junior high schools with lawn turf is a practical way of providing environmental education for schoolchildren, and may also help to reduce the heat-island effect and improve the living environment for future generations of children. In addition, the students, teachers, parents and people from the local community are likely to work together to maintain the lawn, thus enhancing family and community bonds. Therefore, the has engaged in "Activities to Enhance Family and Community Bonds through Environmental Education" since fiscal In fiscal 2012, the provides subsidies totaling approximately 5.0 million yen to 50 elementary and junior high schools whose students' families and teachers help to maintain the schoolyard lawn, which means the subsidized approximately 8.6 million yen to 86 schools over the past two years. 3) Financial Aid for Child-rearing Support Organizations As the birthrate falls and the number of nuclear families increases, the number of parents who are struggling to raise children is rising. In order to help improve the environment for raising children, the has been providing subsidies to non-profit organizations or groups which support those who have preschool children in the community (including expectant mothers) since fiscal Subsidies totaling approximately 198 million yen have been given to 532 groups over the past eight years; the total subsidy was about 14 million yen for 68 groups in fiscal The is also putting effort into providing information on the child-rearing support activities by posting journals regarding the activities of child-rearing support organizations and interviews on the website, as well as by publishing reports summarizing the activities of the organizations. 4) Scholarship Program for Education of Care Workers Care workers play a crucial role in caring for the elderly in today's aging society. In order to support them, the "Scholarship Program for Education of Care Workers" has been run since fiscal So far, 3,837 recipients of the scholarship have been sent out into society and many of them are playing leading roles as care workers across the country. 5) Scholarship Program for Privately-funded International Students in Japan Amid ongoing internationalization, this scholarship has been provided to 339 international students from Southeast Asia and East Asia as an international contribution to assist human exchanges. The is also promoting these students' understanding of Japan through social events. 28

31 3. Our Activities l) Measures against Moral Hazard In order to promote sound management of the life insurance system, the industry is striving to prevent moral hazard such as fraud related to hospitalization benefits and fraudulent acquisition of insurance benefits. The main countermeasures are as follows. 1) Policy Data Registration System A policy data registration system was established to help detect those trying to receive insurance claims illegally by enrolling in several insurance policies for short periods. When life insurance companies receive an insurance policy (including riders like death benefit and hospitalization benefit), the relevant data of policyholders may be stored at the registration center within the. Life insurance companies refer to the registered details to judge whether to accept a contract or whether to pay claims for death or hospitalization benefits. 2) Policy Data Inquiry System Life insurance companies and the National Mutual Insurance Federation of Agricultural Cooperatives (Zenkyoren) have jointly operated the Policy Data Inquiry System aiming to contribute to the continuous development of sound life insurance and cooperative systems since April Under the system, the data held by Zenkyoren and the data registered in the Policy Data Registration System by the can be cross-referenced. They refer to the registered details to judge whether to accept a contract or whether to pay claims for death or hospitalization benefits. 3) Cross Reference System for Assessing Insurance Claims Upon receiving an insurance claim, participating insurance companies and three co-operatives (National Mutual Insurance Federation of Agricultural Cooperatives, National Federation of Workers and Consumers Insurance Cooperatives and Japanese Consumers' Co-operative Union) cross-reference other organizations' data on policyholders. They then use the information when deciding whether to accept a claim from a policyholder or to terminate or cancel an existing contract. 4) Liaison Conference between Life Insurers and the Police In order to prevent the criminal abuse of life insurance, the holds liaison meetings with the National Police Agency. The "Liaison Conference between Life Insurers and the Police" is held between the 's 54 local offices and municipal police headquarters to exchange information on organized crime groups and the prevention of moral hazard. 5) Measures against Anti-social Forces Under the Code of Conduct, the declares that it cuts off all relations with anti-social forces. In this regard, the and the member companies are taking measures such as adding a clause on the elimination of anti-social forces into the policy clauses and establishing an industry-wide database regarding anti-social forces in order to dissolve any insurance contracts with anti-social forces or related parties. 6) Measures against Money Laundering The strives to enhance the awareness of the life insurance industry and ensure the thoroughness of actions through, for example, the 's Code of Conduct, a poster for customers, as well as a handbook and list of potential questions and answers, in order to raise the understanding of life insurance companies regarding money laundering. 29

32 3. Our Activities m) LINC (The Life Insurance Network Center) The life insurance industry established an industry-wide network called the Life Insurance Network Center, or LINC in This network enables insurers to provide more efficient services and to improve information security in the insurance industry, and also reduces the burden of clerical work at a client company. With several improvements to the network system since its establishment, the Center currently operates the following 12 systems. System Outline of Functions 1 Inter-network settlement system among member companies To enable fund settlement among life insurers. 2 Data exchange system on individual policies whose monthly premiums are collected through payrolls Data exchange system on To integrate the data of several life insurers on individual policies 1 individual policies whose monthly whose premiums are paid by voluntary payroll deductions into each premiums are collected through client company which makes payroll deductions from their employees, payroll deduction and to share those data between life insurers and client companies. Internet service on individual To exchange data on individual policies whose premiums are paid 2 policies whose premiums are through voluntary payroll deduction between life insurers and client collected through payroll companies which make payroll deductions from their employees on the deduction Internet. 3 Data exchange system To act as an intermediary for exchanging data on asset-formation on asset-formation insurance insurance. To register the details of medical care insurance contracts to check 4 Registration system whether the same person is designated as an insured with several on medical care insurance medical care insurance companies. 5 Registration system To perform application procedures for registration of licensed life on licensed life insurance insurance solicitors by proxy and manage the register. solicitors To register the details of contracts to check how many contracts 6 Registration system designate the same person as a beneficiary of hospitalization and death on policy data benefits in order to prevent moral hazard. 7 Data distribution system on To collect and distribute data on National Pension Fund insurance National Pension Fund insurance contracts to life insurers offering the insurance. 8 Data exchange system To collect statistical data from life insurers to prepare materials on the on life insurance business business performance of the life insurance industry. statistics 9 Data exchange system on joint To exchange data between life insurers and trust banks to prepare the Employee's Pension Fund joint report on the Employees' Pension Fund. Insurance Report To cross-reference contracts among life insurers when a claim is filed 10 Cross referencing system for insurance benefits and mutual aid money in order to judge whether for assessing insurance claims to pay the benefits, cancel the contracts or allow the contracts to lapse in order to prevent moral hazard. 11 Data exchange system on corporate pension plans among principal companies To exchange settlement data on Employees' Pension Funds and Defined Benefit Corporate Pensions among principal life insurers and principal trust companies. 12 Statistics collection system on To collect survey data on incidence rates including mortality from life incidence rates including insurers and prepare statistical materials. mortality 30

33 4. Requests and Proposals a) Tax Reform The compiled the requests on tax reform for fiscal A summary of the requests is as follows. 1) Key requests The tax deduction scheme for life insurance premiums should be operated on a stable and sustainable basis so that people can take out and continue their insurance policy without anxiety. Besides, in order to encourage self-help efforts in people's lives, expansion of the scheme should be considered in light of the future trends of reform of the social security system. The special corporate tax imposed on reserve funds of corporate pension plans (defined benefit corporate pension plan and employees' pension fund system) and of defined contribution pension plans should be abolished as these plans complement the public pension system. 2) Other requests I. Corporate Pensions The contributions of employers to past service liabilities under defined benefit corporate pension plans and employees' pension funds should be treated flexibly to promote the rapid building of sound pension finances. The condition for lump-sum withdrawal payment at retirement on corporate types of defined contribution pension plans should be relaxed. II. Life Insurance Contracts In order to secure living funds for survivors, the exemption limit for inheritance tax on death benefits which are paid based on the principle of mutual assistance, should be as follows: the sum of (5 million yen in death benefits received by the spouse) plus (5 million yen in death benefits received by an underage dependent legal heir) multiplied by (the number of such dependent heirs), together with the current limit (5 million yen multiplied by the number of legal heirs). III. Asset Management Taxation related to real estate should be comprehensively re-examined. IV. Others The Social Security and Tax Identification Number System should be designed properly prior to its launch in January The current formula for calculating the corporate tax of a life insurance business should be maintained. The requirement for storing accounting documents related to national tax in electronic form should be relaxed. 31

34 4. Requests and Proposals b) IASB (International Accounting Standards Board) 1) Comments on the Exposure Draft - Classification and Measurement: Limited Amendments to IFRS 9 The IASB released an exposure draft, Classification and Measurement: Limited Amendments to IFRS 9, on 28 November The submitted its comments on 28 March 2013 including the following points: The exposure draft proposes the introduction of the 'fair value through other comprehensive income (FVOCI)' measurement category and the requirement for reclassifying the amount recognized in other comprehensive income (OCI) to profit or loss once they are realized (known as recycling). Although these amendments are limited, we appreciate these proposals as they contribute to the appropriate presentation of life insurance business profile mentioned above to some extent. However, there are still outstanding issues which should be addressed, and we believe that the IASB needs to consider the following improvements: Expanding the scope of assets to be measured at FVOCI Eliminating the inconsistent requirement for recycling among assets to be measured at fair value through OCI arising from limited permission for recycling Reducing the undue disclosure requirements for an entity that elects to present the changes in fair value of equity instruments in other comprehensive income (so-called OCI option) Reconsidering the requirement regarding valuation of investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured Ensuring sufficient convergence with FASB's proposals/standards 2) Comments on the Exposure Draft - Financial Instruments: Expected Credit Losses The IASB released an exposure draft, Financial Instruments: Expected Credit Losses, on 7 March The submitted its comments on 5 July 2013 including the following points: We think that the proposed approach in the exposure draft has been improved compared to previous approaches proposed in the exposure draft, Financial Instruments: Amortised Cost and Impairment, published in 2009 and a subsequent supplementary document, Financial Instruments: Impairment (SD), published in 2011, as it further considers an entity's credit risk management method, and therefore, we appreciate the proposed approach. However, as there are still the following serious concerns in practice, we think some improvement measures should be taken to eliminate these concerns. Burdensome practice of identifying deterioration in credit quality Reflecting the time value of money in the estimates of expected credit losses Application of expected credit loss model to bonds that have higher credit rating grades Ensuring consistency between the financial supervisory requirements and the accounting standards Calculation and presentation of interest revenue from financial assets that are classified as Stage 3 Disclosing the carrying amount of financial assets by credit risk rating grades Treatment of the effect of changes in contractual cash flows of a modified financial asset Mandatory effective date 32

35 4. Requests and Proposals 3) Comments on the Exposure Draft - Leases The IASB released an exposure draft, Leases, on 16 May The submitted its comments on 13 September 2013 including the following points: We believe that if an asset is a non-core asset in view of an entity's business activities (i.e. where the amount of assets an entity is using under leasing transactions accounts for a less material portion in the amount of assets an entity is using in its operation), such a leasing transaction underlying a non-core asset should be treated as a rental contract instead of recognizing it in the lessee's statement of financial position. We believe that the IASB should require entities to consider periods covered by an option to extend the lease, only 'when at the inception of the lease it is reasonably certain that the lessee will exercise the option', described in the existing IAS 17: Lease. The same should also be applied in determining the lease term of a short-term lease. We do not believe that the IASB should require the preparers to disclose a wide range of information about a Type B lease, which would likely not provide useful information for users. 4) Comments on the Exposure Draft - Insurance Contracts The IASB released an exposure draft, Insurance Contracts, on 20 June While this exposure draft addresses concerns with the 2010 Exposure Draft to a certain extent, the believes that there are still the following remaining issues to be addressed, and therefore submitted its comments on 25 October 2013: Appropriateness of the scope of unlocking the contractual service margin, which excludes some changes in estimates of future cash flows Complexity in the measurement by decomposing specific cash flows Understandability of the statement of profit or loss and other comprehensive income Impracticability, comparability and verifiability of the transition Faithful presentation of life insurers' financial position regarding the changes in insurance liabilities c) IAIS (International Association of Insurance Supervisors) 1) Comments on Issues Paper on Policyholder Protection Schemes The IAIS released the draft, Issues Paper on Policyholder Protection Schemes, on 21 June 2013 and invited comments from its members and observers. The submitted its comments on 19 August 2013 to clarify some contexts. 2) Comments on the Common Framework for the Supervision of Internationally Active Insurance Groups - For Consultation The IAIS released a public consultation document, Common Framework for the Supervision of Internationally Active Insurance Groups - For Consultation, on 17 October The submitted its comments on 16 December 2013 including the following points: We are aware that some of our comments submitted in response to the 2012 ComFrame draft published for consultation have been addressed in this ComFrame draft, and we recognize that the draft has been properly improved as a final draft because simple terms and structures are used throughout. Therefore, we believe that it is heading in the right direction. However, as some of the requirements set out in this ComFrame draft remain excessively prescriptive, there is a concern that those requirements may not be able to maintain consistency with national legislations and market environments. As stated in the Cornerstones of ComFrame in the Introductory Remarks, the requirements set out in this ComFrame draft should aim to achieve group-wide supervision on an 'outcome basis'. Thus, we believe that the requirements in this ComFrame draft should be set out on principle basis. We believe that it is necessary to carefully verify if the said requirement is applicable in practice through field tests. With regard to capital requirements, we would like to submit additional comments where appropriate, when further details are provided for consultation. 33

36 4. Requests and Proposals d) Others 1) Comments on the FSB's consultative document, Strengthening Oversight and Regulation of Shadow Banking: A Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos The Financial Stability Board (FSB) released a consultative document, Strengthening Oversight and Regulation of Shadow Banking: A Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos, on 18 November The submitted its comments on 11 January 2013 including the following points: We have deep concerns about, in particular, the proposed 'minimum standards for cash collateral reinvestment' and 'standards for minimum haircuts', presented in the consultative document. Therefore, we would like the FSB to take into account the differences in circumstances and business profile in each jurisdiction and avoid adopting uniform regulation. Considering the nature of cash-collateral repo transactions by life insurers in Japan, we think the proposed 'minimum standards for cash collateral reinvestment' focus essentially on market participants who are engaged in security lending by using 'client assets' managed separately from their own assets (e.g. custodians), rather than life insurers who are engaged in security lending for their own account. With regard to the proposed 'standards for minimum haircuts', we believe that particularly transactions posting sovereign bonds (e.g. Japanese Government Bonds) as collateral in the Japanese market should be excluded from the standards, considering the circumstance that the haircut is not applied in the current market practice, as well as the high liquidity of the bonds. 2) Comments on BCBS and IOSCO's Second Consultative Document - Margin Requirements for Non-centrally Cleared Derivatives The Basel Committee on Banking Supervision (BCBS) and the Board of the International Organization of Securities Commissions (IOSCO) published the second consultative document, Margin Requirements for Non-centrally Cleared Derivatives, on 15 February The submitted its comments on 15 March 2013 including the following points: We have serious concerns regarding the "administration under foreign exchange (FX) forwards and swaps regulations," "advisability of initial margin re-investment" and "need to amend the ISDA-CSA Agreement" in the consultative proposal. With regard to the "administration under the FX forwards and swaps regulation" in particular, we strongly request that the introduction of this regulation be excluded from the regulations because the impact will affect not only the financial industry, but all commercial activities that involve currency transactions as well. 3) Comments on the FSB's public consultation document, Strengthening Oversight and Regulation of Shadow Banking: Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos The FSB released a public consultation document, Strengthening Oversight and Regulation of Shadow Banking: Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos, on 29 August The submitted its comments on 28 November 2013 including the following points: We have deep concerns about the proposed 'minimum standards for cash collateral reinvestment', 'minimum standards for methodologies used by market participants to calculate haircuts', and 'numerical haircut floors'. Therefore, we would like the FSB to take into account the differences in circumstances and business profile in each jurisdiction and avoid adopting uniform regulation. Liquidity problems that occurred in the financial crisis motivated the regulations proposed in this public consultation document. We believe that life insurers in Japan should be excluded from the proposed 'minimum standards for cash collateral reinvestment', 'minimum standards for methodologies used by market participants to calculate haircuts', and 'numerical haircut floors', as insurers in Japan are sufficiently supervised and monitored by regulatory authorities with regard to liquidity risk management. 34

37 5. The Life Insurance Association of Japan () The Life Insurance Association of Japan () started as an incorporated association with formal sanction by the authorities concerned on 7 December Since then, the Association has continued to make efforts for the sound development of the life insurance industry. a) Objective To strive for the sound development of the life insurance industry and maintain its reliability b) Functions (a) Research and study of theories and practices relating to life insurance (b) Public relations relating to life insurance (c) Statement on life insurance (d) Other functions considered necessary to attain the purpose of the Association c) History 1898 The Forum of Japanese Life Insurers was founded The Forum of Japanese Life Insurers was reorganized into the Association of Japanese Life Insurers The Association of Japanese Life Insurers was authorized as an incorporated association The Life Insurance Control Association was founded. The Association of Japanese Life Insurers was renamed the Life Insurance Network, and most of its operations were transferred to the Life Insurance Control Association The Life Insurance Council of Japan was founded to take over the operations of the Control Association after it was dissolved. The Life Insurance Network was renamed The Life Insurance Association of Japan (). All the operations of the Life Insurance Network were transferred to the The marked the 100th anniversary since its foundation. d) Membership All 43 life insurance companies operating in Japan (As of January 1, 2014) e) Board Members Representatives of member companies and full-time officers of the (See page 37 for the list of Board Members.) f) Offices 54 offices (the headquarters in Tokyo and 53 local offices) g) Number of Employees 255 employees (As of January 1, 2014) h) Funding Membership fees and revenues from business activities such as examination business (Budget for fiscal 2012: approx billion yen, of which 3.63 billion yen from membership fees and 1.36 billion yen from revenues from business activities) 35

38 5. The Life Insurance Association of Japan () Organization Chart (As of January 1, 2014) The Life Insurance Association of Japan () General Meeting Auditors Board of Directors Committees Local Committees Association Office General Affairs Dept. Public Relations Dept. Administration & Education Dept. Planning Dept. Life Insurance Consultation Center Arbitration Advisory Committee Arbitration Council Research Dept. Joint System Office Life Insurance Consultation Office International Dept. Housing Loan Credit Life Insurance Management Office Local Offices (53 Districts) 36

39 Board Members (As of January 1, 2014) 5. The Life Insurance Association of Japan () Chairman Yoshio Sato Vice Chairmen Koichiro Watanabe Yoshiteru Yoneyama Katsuhide Tanaka President & CEO, Sumitomo Life Insurance Co. President, THE DAI-ICHI LIFE INSURANCE COMPANY, LIMITED President, Fukoku Mutual Life Insurance Co. Representative Director and President, Taiyo Life Insurance Company Directors Jennifer Sparks Yoshinobu Tsutsui Toshifumi Kitazawa Katsumi Ihara Hitoshi Morita Mitsuru Imoto Shoichiro Ichitani Atsushi Kumanomido Toru Yamaguchi Jean-Louis Laurent Josi Tohru Tonoike Yoshiki Sato Akio Negishi Sachin N. Shah Shinya Arisue Shizuka Sasaki Representative Director, President and CEO, Hartford Life Insurance K.K. President, Nippon Life Insurance Co. President, Tokio Marine & Nichido Life Insurance Co., Ltd. President and Representative Director, Sony Life Insurance Co., Ltd. Representative Executive Officer, Manulife Life Insurance Company Representative Director and President, MassMutual Life Insurance Company President and Chief Executive Officer, The Prudential Life Insurance Co., Ltd. President & CEO, NKSJ Himawari Life Insurance, Inc. Representative Officer & Executive Vice President, ING Life Insurance Company, Ltd. Director, Representative Executive Officer, President and CEO, AXA Life Insurance Co., Ltd. President of Aflac Japan, American Family Life Assurance Company of Columbus President, Asahi Mutual Life Insurance Co. President, Meiji Yasuda Life Insurance Company Representative Statutory Executive Officer, Chairman, President, and CEO, MetLife Alico Life Insurance K.K. President, Mitsui Life Insurance Company Limited President & CEO, Mitsui Sumitomo Aioi Life Insurance Co., Limited. Vice Chairmen (Full-time) Shizuharu Kubono Fumio Tokubutsu The Life Insurance Association of Japan The Life Insurance Association of Japan Director (Full-time) Hiroaki Tanase Auditors Yasunori Kume Norio Tomono Noboru Tsuda Kazuo Ohtake The Life Insurance Association of Japan Representative, CARDIF Assurance Vie Representative Director, President and COO, AIG Fuji Life Insurance Company, Limited Representative Director and President, Allianz Life Insurance Japan Ltd Attorney at Law 37

40 5. The Life Insurance Association of Japan () Member Companies (As of January 1, 2014, in alphabetical order) AEGON Sony Life Insurance Co., Ltd. Aoyama Oval Building, Jingumae, Shibuya-ku, Tokyo AIG Fuji Life Insurance Company, Limited Kamiyacho MT building, Toranomon, Minato-ku, Tokyo Allianz Life Insurance Japan Ltd. Anzen Building, 6-6 Motoakasaka 1-Chome, Minato-ku, Tokyo American Family Life Assurance Company of Columbus Nishishinjuku 2-Chome, Shinjuku-ku, Tokyo Asahi Mutual Life Insurance Co Ote-machi 2-Chome, Chiyoda-ku, Tokyo AXA Life Insurance Co., Ltd. NBF Platinum Tower, Shirokane, Minato-ku, Tokyo AXA Direct Life Insurance Company Limited KDX Kojimachi Building 8F, Kojimachi, Chiyoda-ku, Tokyo CARDIF Assurance Vie 9F Infoss Tower, 20-1 Sakuragaoka-cho, Shibuya-ku, Tokyo Crédit Agricole Life Insurance Company Japan Ltd. Shiodome Sumitomo Building 15F, Higashi-Shimbashi, Minato-ku, Tokyo Daido Life Insurance Co Edobori 1-Chome, Nishi-ku, Osaka-shi Fukoku Mutual Life Insurance Co Uchisaiwaicho 2-Chome, Chiyoda-ku, Tokyo Fukokushinrai Life Insurance Co., Ltd Nishi-Shinjuku, Shinjuku-ku, Tokyo Hartford Life Insurance K.K. Shiodome Building 15 th Floor, Kaigan, Minato-ku, Tokyo ING Life Insurance Company, Ltd. 26F New Ohtani Garden Court 4-1 Kioicho, Chiyoda-ku, Tokyo JAPAN POST INSURANCE Co., Ltd Kasumigaseki 1-Chome, Chiyoda-ku, Tokyo LIFENET INSURANCE COMPANY Kojimachi NK Building 5F, 14-2 Kojimachi 2-Chome, Chiyoda-ku, Tokyo Manulife Life Insurance Company Kokuryo-cho 4-Chome, Chofu-shi, Tokyo MassMutual Life Insurance Company Ariake, Koto-ku, Tokyo Medicare Life Insurance Co., Ltd. Sumitomo-seimei Kiyosumi Park Bldg. 5F, Fukagawa, Koto-ku, Tokyo Meiji Yasuda Life Insurance Company Marunouchi 2-Chome, Chiyoda-ku, Tokyo MetLife Alico Life Insurance K.K Taihei, Sumida-ku, Tokyo

41 5. The Life Insurance Association of Japan () Midori Life Insurance Company Ohji, Kita-ku, Tokyo Mitsui Life Insurance Company Limited Aomi, Koto-ku, Tokyo Mitsui Sumitomo Aioi Life Insurance Co., Limited , Nihonbashi, Chuo-ku, Tokyo Mitsui Sumitomo Primary Life Insurance Company, Limited 16F Yaesu First Financial Bldg., Yaesu, Chuo-ku, Tokyo Nippon Life Insurance Co Imabashi 3-Chome, Chuo-ku, Osaka-shi NKSJ Himawari Life Insurance, Inc. Shinjuku Central Park Bldg., 13-1 Nishi-Shinjuku 6-chome, Shinjuku-ku, Tokyo ORIX Life Insurance Corporation Akasaka Star Gate Plaza, Akasaka, Minato-ku, Tokyo PCA LIFE Insurance Co., Ltd. ATT New Tower, Akasaka, Minato-ku, Tokyo Rakuten Life Insurance Co., Ltd. Tradepia Odaiba 20F, Daiba, Minato-ku, Tokyo Sompo Japan DIY Life Insurance Co., Ltd Nishishinjuku, Shinjuku-ku, Tokyo Sony Life Insurance Co., Ltd Minamiaoyama 1-Chome, Minato-ku, Tokyo Sumitomo Life Insurance Co Shiromi 1-Chome, Chuo-ku, Osaka-shi THE DAI-ICHI LIFE INSURANCE COMPANY, LIMITED Yurakucho 1-Chome, Chiyoda-ku, Tokyo The Dai-ichi Frontier Life Insurance Co. Ltd Harumi 1-Chome, Chuo-ku, Tokyo The Gibraltar Life Insurance Co., Ltd. Prudential Tower, Nagata-cho, Chiyoda-ku, Tokyo The Prudential Life Insurance Co., Ltd. Prudential Tower, Nagata-cho, Chiyoda-ku, Tokyo The Prudential Gibraltar Financial Life Insurance Co., Ltd Nagata-cho, Chiyoda-ku, Tokyo Taiyo Life Insurance Company Kaigan, Minato-ku, Tokyo Tokio Marine & Nichido Financial Life Insurance Co., Ltd. Integral Tower, Kamiogi, Suginami-ku, Tokyo Tokio Marine & Nichido Life Insurance Co., Ltd. Tokio Marine Nichido Building Shinkan, Marunouchi, Chiyoda-ku, Tokyo T & D FINANCIAL LIFE INSURANCE COMPANY Kaigan, Minato-ku, Tokyo Zurich Life Insurance Company Ltd. Nakano Central Park South 16F, Nakano, Nakano-ku, Tokyo

42 40 Appendix

43 Appendix I. Voluntary Guideline List In order to fulfill social responsibilities and business roles, the defines a code of conduct for life insurance companies and their officers/employees to follow and provides voluntary guidelines for practical handling and points to consider, to be reflected in their operations. Code of Conduct Specifies basic requirements and policies to be followed in member companies business management and in senior managers and employees performance Guidelines for Appropriate Representation of Life Insurance Products Aims to ensure appropriate representation of insurance products in sales materials Guidelines for System related to Reviewing Materials for Soliciting Life Insurance Products Specifies information for improving the system related to reviewing materials for soliciting life insurance products Guidelines for Policy Overview Specifies how to draft and compile the Policy Overview notice, which contains essential information on the contents of insurance products Guidelines for Warning Information Specifies how to draft and compile the "Warning Information" notice, which contains warning that insurers should give customers regarding the contents of insurance contracts Guidelines for Pre-contact Documentation Specifies matters to be noted when preparing Policy Overview and Warning Information in concluding contracts for insurance products with strong investment characteristics such as variable insurance Guidelines for the Sales of Life Insurance with Market Risks Specifies appropriate advertising, solicitation, confirmation of customers intentions, needs or contents of contracts concluded Guidelines for Obtaining Faithful Disclosure from Customers Specifies information policyholders must be made aware of to ensure faithful disclosure, and shows samples of sales materials and correctly completed non-medical report (customers' disclosure). Also specifies suitable sales explanations, content of solicitors' training program. Guidelines for Appropriate Application or Underwriting of Life Insurance Policies Targeting Minors as the Insured Specifies reference information for member companies when they undertake life insurance policies targeting minors, especially under the age of 15 Guidelines for Appropriate Insurance Payout Procedures Aims to promote an appropriate insurance payout control system by clarifying points for prompt and appropriate payout procedures. Also shows suitable explanations to provide when receiving claims and giving instructions, refusing claims, etc. Guidelines for Advising Customers on How to File a Claim Describes the principle of how to handle insurance claims at each company, and provides concrete example of how to advise customers Handbook on anti-money laundering and combating the financing of terrorism Q&A on anti-money laundering and combating the financing of terrorism Describes money laundering and terrorist financing as well as their countermeasures Procedural Guidelines for Personal Information Protection in the Life Insurance Business In accordance with the Act on Protection of Personal Information, guidelines regarding purpose of use, security measurers, and procedures for providing policyholders with their own personal information upon request. Practical Guideline for Life Insurers' Security Control Measures to Secure Personal Data Protection Specifies necessary and appropriate rules and building a system for securely managing personal data Action Guidelines for Environmental Issues Aims to help preserve the environment and to hand over a rich and stable world to future generations, acknowledging the importance of environmental issues as well as the role of the life insurance business in providing security for people with the spirit of cooperation. Life Insurance Industry's Commitment to a Low Carbon Society Aims to promote further actions on environmental issues 41

44 Appendix II. Japan Institute of Life Insurance (JILI) Japan Institute of Life Insurance (JILI) is an independent organization established as a general information center on life insurance. It aims to understand consumer needs for life insurance and to provide accurate information from a neutral standpoint, thus promoting mutual understanding between consumers and the life insurance industry. 1) Providing information on life design and life insurance Through its website, brochures and newsletters, the JILI provides information that customers need to know when concluding life insurance contracts and claiming life insurance payments, as well as information on life security, life design, and taxation. 2) Sending instructors to development courses for consumers The JILI sends instructors to life insurance seminars on how to use life insurance effectively, life design as well as pension and medical care, at the request of consumer related organizations throughout the nation. 3) Strengthening cooperation with consumer related organizations The JILI holds technical seminars on life insurance for consultants who give advice to the public at consumer centers throughout the nation. In cooperation with the, the JILI also exchanges opinions with government organizations and consumer consultants through "Interactive Dialogue on Life Insurance" and works closely with them. 4) Supporting education on life design and life insurance In order to provide opportunities to learn about life design and life insurance, the JILI undertakes activities for students ranging from junior high school to university. 5) Holding an essay contest for junior high school students The JILI holds an essay contest on the theme "Our life and life insurance" for junior high school students every year. 6) Providing advice on life insurance The JILI responds to consumer requests and gives easy-to-understand advice on life insurance and life design from a neutral and fair standpoint. 7) Academic promotion of life insurance Focusing on insurance science and insurance law, the JILI operates a society for the study of life insurance, promotes research on life insurance, issues academic publications and operates as the secretariat of related societies. 8) Research on awareness and the state of preparations for life security The JILI researches the actual state (situation of life insurance ownership) and awareness of preparations for life security at three-year intervals and publishes the results for the public. The research data is used by various parties such as researchers and the mass media. 42

45 Appendix III. Life Insurance Policyholders Protection Corporation of Japan (LIPPCJ) The Life Insurance Policyholders Protection Corporation of Japan (LIPPCJ) is a corporate entity that was established on 1 December 1998 based on the Insurance Business Act. All life insurance companies operating in Japan automatically become members of the Corporation. The LIPPCJ s mission is to provide financial assistance at the time of bankruptcy of life insurance companies, such as when insurance policies are transferred from an insolvent insurance company or when insurance claims to be compensated are paid (which shall be paid when the insured event occurs before the approval of the reorganization plan), as a mutual assistance scheme for the benefit of policyholders of life insurance companies. Also, the LIPPCJ acts on behalf of policyholders in following a life insurer s reorganization proceedings, which includes all actions such as voting by proxy at stakeholders meetings that discuss the proposed reorganization plan drawn up by the reorganization trustee. (Note) The LIPPCJ s scheme of voting by proxy was established to ensure that reorganization proceedings are smoothly completed, and does not prohibit voting by the policyholder. Role of LIPPCJ under the scheme When a relief company taking over the insurance contracts of an insolvent insurance company steps forward: Payment of compensated claim Insolvent Insurance Company Policyholders Complete or partial transfer of insurance contract Merger and acquisition of stock Relief Insurance Company Continue the business regarding transferred contract/ Payment of insurance claim Financial assistance for payment of compensated claim The Life Insurance Policyholders Protection Corporation of Japan Contribution Financial Assistance Member Companies 43

46 Appendix III. Life Insurance Policyholders Protection Corporation of Japan (LIPPCJ) When a relief company taking over the insurance contracts of an insolvent insurance company does not step forward: 1. Transfer of contracts to a bridge-insurance company Payment of compensated claim Policyholders Continue the business regarding transferred contract/ Payment of insurance claim Insolvent Insurance Company Transfer of contract Bridge-Insurance Company Financial assistance for payment of compensated claim The Life Insurance Policyholders Protection Corporation of Japan Contribution Loan/Financial assistance Member Companies 2. Contracts undertaken by the LIPPCJ Payment of compensated claim Policyholders Continue the business regarding transferred contract/ Payment of insurance claim Insolvent Insurance Company Transfer of contract Financial assistance for payment of compensated claim The Life Insurance Policyholders Protection Corporation of Japan Contribution Member Companies 44

47 Appendix III. Life Insurance Policyholders Protection Corporation of Japan (LIPPCJ) Scope of the compensation Insurance contracts to be compensated by the LIPPCJ are as follows: Insurance contracts of life insurers operating in Japan (excluding the special accounts of investment-linked insurance policies such as defined contribution pension plans, group pure endowment insurance and defined benefit corporate pension plans) Ceilings on the compensations 90% of policy reserves (excluding policies with high expected interest) at the time of bankruptcy The compensation limit on policies with high expected interest is as follows: 90% - [sum of (each expected assumed interest rate in the past 5 years the base rate) / 2] of policy reserves Funding of LIPPCJ for Financial Assistance 1. Accumulation of contributions by pre-funding by life insurance companies (Amount limit of accumulation: 400 billion yen) 2. Government-guaranteed loans in case when the actual payment exceeds the total amount of accumulated contributions by life insurance companies (Amount limit of loans for the industry: 460 billion yen) 3. Government subsidy is available for the bankruptcy of a life insurance company till the end of March 2017 under certain conditions, in case funds from life insurance companies cannot cover the full amount of necessary financial assistance. 45

48 The Life Insurance Association of Japan () 3rd floor, Shin-Kokusai Building, 4-1 Marunouchi 3-Chome, Chiyoda-ku, Tokyo Japan Telephone: Facsimile: Published in February 2014