Widespread Insurance Fraud: Excessive Focus on Performance-Based Compensation Exacerbated Problem

Editorial

14:59 JST, April 29, 2026

Fraud involving the swindling of money from customers at foreign-affiliated life insurance companies and other firms continues to spread. Such deception is utterly unacceptable for an industry that is supposed to provide peace of mind.

In January, a large-scale financial fraud scheme involving sales employees at the foreign-owned Prudential Life Insurance Co. was uncovered. They received a total of ¥3.1 billion from about 500 customers.

For about 30 years, there had been rampant use of methods in which employees and former employees solicited investments in fictitious financial products or asked for loans. This is a shocking situation.

It has now been revealed that the number of new reports of victimization has risen to about 700. Of these, about 70 cases reportedly involved employees of Gibraltar Life Insurance Co., which is a Prudential group company.

Prudential plans to extend its voluntary sales suspension period from early May to early November and implement measures to prevent a recurrence. The company should conduct a comprehensive review of its employee training and corporate governance.

It is particularly serious for the insurance industry that a new case of financial fraud has also come to light at Sony Life Insurance Co.

A former sales staffer reportedly collected a total of ¥2.2 billion from about 100 customers that they claimed were for investment purposes, and about ¥1.2 billion has not been paid back. The company plans to investigate all of its 2.8 million policies from now on.

Given the wide extent of the issue, it must be said that trust in the industry has been fundamentally shaken.

Foreign-affiliated and emerging life insurers, such as Prudential and Sony, have been referred to as “katakana life insurers” because their Japanese names contain katakana, in contrast to traditional domestic insurance companies like Nippon Life Insurance Co.

Domestic life insurance companies are characterized by their sales method of focusing on moral duty, humanity and gifts.

In contrast, katakana insurers have a history of boosting sales by meticulously analyzing customers’ life plans and offering tailored insurance proposals, affordable premiums and flexible product designs as their selling points.

Both Prudential and Sony have attempted to break the stronghold of the major life insurance companies by employing sales staffers with specialized knowledge, known as life planners, who work closely with customers.

It is unacceptable for employees of companies like Prudential to exploit customers’ trust to defraud them of money.

A compensation structure that is based nearly entirely on commission likely served as a hotbed for misconduct. Once a person starts engaging in wrongdoing, the pursuit of money can become unstoppable.

Given both the duration and the scope of the inappropriate practices, there may have been shortcomings in the Financial Services Agency’s supervision. The FSA must urgently conduct on-site inspections and other measures to fully uncover the extent of the misconduct.

(From The Yomiuri Shimbun, April 29, 2026)