The Financial Services Agency on Thursday ordered Nippon Life Insurance Co. to change its sales practices after finding that the company slanders competitors to encourage individuals to switch firms.
The move follows allegations that the top Japanese life insurer instructed some employees at a seminar in the Tohoku region earlier this year to use data on its rivals' financial positions to persuade customers to join Nippon Life.
Under the current law, insurers are banned from selling their policies by speaking ill of rival firms.
Nippon Life said in a statement that it will do its utmost to prevent the incidents recurring by educating employees and management to abide by regulations.
Nippon Life has already received more than one warning from financial authorities over illegal sales practices.
The FSA decided to issue an administrative order to Nippon Life as some of its employees still resort to sales tactics based on rumors or innuendo that may trigger a wave of policy cancellations of other insurers, industry sources said.
According to the sources, Nippon Life distributed documents at the sales seminar in Tohoku, detailing financial data of rival insurers, such as estimated earnings and appraisal losses or profits on their securities holdings.
Recently, an increasing number of life insurers have collapsed in Japan. Tokyo Mutual Life Insurance Co. went bust in March, while Chiyoda Mutual Life Insurance Co. and Kyoei Life Insurance Co. went under last October.
Before their collapse, the companies suffered a wave of policy cancellations following rumors that they were facing serious financial troubles.