Big Motor’s Non-Life Insurance Agency Registration Ends at the End of November

On November 30, the Kanto Local Finance Bureau issued an administrative sanction under Article 307, Paragraph 1, Item 3 of the Insurance Business Law, revoking the registration of BM Group (Big Motor Co., Ltd., BM Holdings Co., Ltd., BM Hanaten Co., Ltd.) as non-life insurance agents.

 

Until now, each of Big Motor’s stores had been a non-life insurance agent for Tokio Marine & Nichido, Sompo Japan, Mitsui Sumitomo Insurance, and other non-life insurance companies. This allowed Big Motor, which is not a non-life insurance company, to handle procedures for voluntary insurance and liability insurance contracts. However, as a result of this administrative action, Big Motor will no longer be able to register as a non-life insurance agent under the same legal entity for at least three years from now.

Prior to the administrative action, the Kanto Local Finance Bureau released details of the action on November 24. The details included such surprising explanations as “Kaneshige and his son were overly motivated to increase profits and manage the company according to their own wishes, and neglected to establish a legal compliance system and a management control system that a large company should naturally have in place,” and “the board of directors meeting was held only once in about seven years,” The report also details a number of “cases of impropriety” revealed by the on-site inspection. The following are some of the major examples.

The inspection found that in 122 cases, the solicitors did not provide comprehensive explanations of important matters.

1. In the insurance recruitment system, we extracted and confirmed 148 contracts in which it was recorded that contract conclusion procedures were completed in an extremely short period of time, and in 122 cases, the solicitor did not provide a comprehensive explanation of important matters. It was recognized that this was not the case.
2. The solicitors offered special benefits prohibited by Article 300, Paragraph 1, Item 5 of the Insurance Business Law, such as discounts on vehicle prices on the condition of purchasing insurance.
3. When 88 insurance policies of solicitors were extracted and confirmed, 14 policies were found to have been improperly solicited, such as being pressured by the store manager, etc., to join.
4. In 121 of the 149 insurance policies of subcontractors, it was determined that insurance was purchased under pressure, and other inappropriate solicitation activities were also performed on the subcontractors.

 

In other words, it was revealed that Big Motor had been pressuring its subcontractors to sign up for insurance policies in the absence of a guidance system for proper insurance solicitation. Note that these figures are only a sampling and not the full results of the investigation.

According to a survey by a non-life insurance company, there were more than 150,000 voluntary insurance policies in force at Big Motor as of the end of August 2023. Although this is a tremendous number, all of these contracts will be terminated on November 30, and the company will then shift to direct contracts with non-life insurance companies or to designated non-life insurance agents. The insurance coverage will be automatically taken over, so the policies will remain in effect until they expire.

 

Based on independent interviews with related parties, it is estimated that the commissions and incentives received by Big Motor for voluntary insurance sales (insurance contracts) will amount to an annual profit of approximately 3 billion yen. If CALI insurance commissions and other fees are taken into account, the annual profit is estimated to be approximately 3.5 billion yen.

In addition to these profits, there is another reason why Big Motor was so eager to sell insurance. An official of a non-life insurance company tells us about the company’s goal.

“They probably wanted to increase their influence over the P&C insurers by collecting contracts. In particular, I think they wanted to give priority to DRS (referrals from non-life insurers to Big Motor’s sheet metal shop). They said, “We have so many insurance resources, so give us DRS. Otherwise, I won’t let you be in charge of the store!” Because this kind of pressure was the norm, fraudulent claims probably went unchecked. Unless that was the case, insurance companies would never overlook fraudulent claims. If the insurance company had found out that it was really organized, I think they would have gone after them thoroughly.”

The purpose of selling insurance on behalf of the company was not to earn commissions, but to get preferential treatment for incoming referrals by selling a lot of insurance. By letting customers into Big Motor’s sheet metal shop, the company was probably anticipating the cost of repairs and the added profit that would result from fraudulent claims.

 

Big Motor is no longer able to sell insurance, one of the pillars of its business. However, there is a “surprising loophole” in the cancellation of the registration.

According to a confirmation with the Kanto Local Finance Bureau, which prepared the documents, the BM Group’s registration as a non-life insurance agent was revoked as a result of this administrative action, and the company will not be able to re-register as the same entity for at least three years. However, this is only on the premise that the “same corporation” is the same corporation. This does not apply, for example, if Big Motor is bailed out by some other company and changed to another corporation. The authorities will conduct various examinations, but they cannot say at this stage what kind of evaluation they will make, and there is no possibility that the company will be able to register as a P&C insurance agency again as a new legal entity.

A due diligence (acquisition audit) by the ITOCHU Group has already been announced for Big Motor. When asked if the revocation was influenced by this, the Kanto Local Finance Bureau replied that it was not taken into consideration, but if ITOCHU’s support is successful, Big Motor will change its name and make a new start on April 2024. The insurance business is an essential part of the automobile sales, maintenance, and inspection scene. We will continue to focus on the future of the insurance business, which will have a significant bearing on the future of Big Motor.

 

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