A House of Representatives panel approved a controversial bill Tuesday that would allow life insurers to lower yields guaranteed to their policyholders on the grounds this will avoid bankruptcies.

The bill, endorsed by the financial affairs committee of the Lower House, is expected to win approval in the full Lower House on Thursday and pass the House of Councilors by the end of the current Diet session. The legislation could take effect as early as July.

The amendment to the Insurance Business Law allows life insurers to cut guaranteed yields -- the rate of investment return an insurer promises policyholders -- before facing bankruptcy.

The legislative change was proposed as the industry struggles with falling share prices while still tied to providing guaranteed yields that were promised in the bubble economy years in the late 1980s, when interest rates were higher.

Opposition lawmakers have fiercely resisted the plan because it would force lower returns on some policyholders. Some have said the bill is too vague about cases in which such cuts will be permitted.

Prime Minister Junichiro Koizumi made a pitch for the bill shortly before the committee vote, saying it will offer the possibility of saving policyholders by avoiding bankruptcies.

"The bill provides an option to protect policyholders by avoiding bankruptcies (among life insurers)," he said.

Koizumi emphasized that the plan was only meant to provide an option and that whether the guaranteed yields are lowered will be the result of discussions between life insurers and policyholders.

"This is not something that will be forced on them (policyholders). This is only meant to provide an option," he said.