Japanese life insurer Nippon Life Insurance will discontinue the practice of seconding its employees with banks and other lender institutions. A news report in the Japan Times said these agreements have allowed Japanese insurers to dispatch staff on a temporary basis to financial firms, where they can sell the companies' insurance products.
There have, however, been voices of criticism that this practice of temporarily sending employees to work in the sales departments of financial firms has led to misconduct and has reduced competition.
According to the report in The Japan Times, Nippon Life now has 51 employees working at other firms including banks. The life insurer will work out with these companies about removing the workers from those arrangements or reassigning them to departments other than sales.
To prevent the practice of secondment and any impediments that it may cause in customers' appropriate selection of insurance products and the independence of insurance agents, the General Insurance Association of Japan (GIAJ) in September 2024 established and announced guidelines for the secondment of employees from general insurance companies to financial firms.
These guidelines outline requirements such as the purpose of the secondment, duties and the authority in charge, the number of employees on secondment, duration of secondment, and contributions placed for secondment, as well as the basic concept regarding the establishment of a supervisory department to confirm whether these requirements are met.
In addition, in light of the recent cases of information leakage by secondees, the guidelines clearly state the importance of compliance with the Act on the Protection of Personal Information and other related laws and regulations.
The GIAJ also issued guidelines on its members’ cross-shareholdings, or purchase of the stock of their clients to deepen business ties, to ensure a fair market environment. The guideline also bans companies from taking on new cross-shareholdings.
Japan’s regulators have been insisting that the companies make their operations more transparent and try to increase shareholder returns. The corporate sector has also faced pressure to sell off cross-held stocks, often of allied firms, that were ubiquitous in the past in Japan’s market, limiting the number of shares available for investors.