Japan watchdog orders partial business suspension at scandal-hit Prudential

TOKYO – Japan’s financial watchdog on Friday ordered Prudential Life Insurance Co. to partially suspend its business over misconduct by sales staff, including improperly receiving money from customers.

The suspension of operations related to new insurance contracts will run from Tuesday through Jan. 31, with the Financial Services Agency determining that Prudential Life Insurance had failed to adequately manage and supervise its sales employees and that internal systems designed to prevent misconduct were ineffective.

The financial watchdog also urged the company to clarify the responsibilities of current and past executives who prioritized sales promotion while leaving misconduct unaddressed.

Although the misconduct cases included defrauding customers of money, the agency stopped short of imposing more severe penalties such as revoking the company’s license to operate as an insurer.

The punishment came after Prudential Life Insurance said Thursday a third-party probe by lawyers had found that more than 100 former and current salespeople had engaged in fraudulent or inappropriate transactions with customers worth 5.2 billion yen ($33 million) over more than three decades.

Prudential Life Insurance voluntarily suspended sales activities for new contracts in February, but cases in which its employees improperly received money from customers were revealed even after that.

The financial watchdog found that the management’s supervision had been ineffective, leaving it uncertain whether the company will be allowed to resume sales after the suspension period is over.

Meanwhile, the company will continue to provide services related to existing contracts, including the payment of insurance money and benefits.

The agency on Friday also issued a business improvement order to Prudential Holdings of Japan Inc., the parent company, and a partial business suspension order to The Gibraltar Life Insurance Co., a group company.

The parent company said in a statement that it takes the punishment seriously and will move forward with structural reforms.