Prudential Life Insurance logo (Chiyoda Ward, Tokyo)
Is this company actually functioning as a life insurance company? Given the unprecedented scandal, it is little wonder that Prudential Life Insurance Company is seen as a group of swindlers.
Prudential Life Insurance is the Japanese unit of a major foreign life insurance company. Recently, it was uncovered that its employees have been defrauding customers of massive amounts of money for many years by signing them up for fictitious investment schemes.
Moreover, the fraud culture was deeply entrenched within Prudential. More than 100 current and former employees appear to have been involved in the fraud. This is not a situation that can be explained away as the work of certain individuals.
Its actions are entirely unacceptable. A life insurance company, by the very nature of its business, is expected to provide peace of mind to its customers. Prudential's behavior calls into question the very rationale for the company's existence.
Problematic Corporate Culture
Management that overly emphasizes employee performance can be seen as a breeding ground for illicit practices. In this case, Prudential richly rewarded sales personnel who secured new contracts. However, there were also cases where employees did not achieve sufficient results. In those cases, some were left without enough money to cover work expenses or even basic living expenses.
President Hiroshi Mahara resigned on February 1 to take responsibility for the scandal. This was only fitting. The company also announced that it would voluntarily suspend sales activities for new insurance policies for 90 days from February 9. According to the company, that would allow it to overhaul its sales and corporate governance structure.
However, it is unlikely that these moves alone will prove sufficient to prevent recurrence of such abuses. Unless the company fundamentally changes its corporate culture through drastic internal reforms, it could lose the right to continue doing business in Japan. Prudential's management needs to realize this.
The Financial Services Agency takes this misconduct seriously and has decided to conduct an on-site inspection. Strict disciplinary action is obviously necessary, and the authorities must conduct a thorough investigation.
Hundreds of Victims
Prudential's series of fraudulent acts was revealed in an internal investigation conducted following the arrest of a former employee on suspicion of fraud in June 2024.
It found that approximately 500 Prudential customers have been victimized. Incredibly, the fraud spanned over 30 years, starting in 1991. In all, a total of ￥3.1 billion JPY (about $20 million USD) was stolen from customers.
The company's lack of awareness of its duty of legal compliance is appalling. Meanwhile, Prudential says it plans to have an independent compensation committee review each suspected fraud case. It also says it will provide full compensation for customer losses. Unquestionably, the company should promptly compensate all the fraud victims.
Even so, an internal investigation alone hardly seems sufficient to clarify all the wrongdoing. Rather, a third-party commission should be established to conduct a rigorous investigation.
Breaching the Public Trust
Another problem is that Prudential's management has shown little awareness of the seriousness of the scandal. Consider the way the company has dragged its feet regarding the disclosure of pertinent information. Despite the scale of the fraud, at first, management had no plans to even hold a press conference.
The insurance industry has been hit by a series of scandals. Another is the revelation that employees on loan to banks and financial institutions had made off with confidential client information.
Trust is the lifeline of an insurance company. All industry stakeholders should keep that fact firmly in mind.
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Author: Editorial Board, The Sankei Shimbun
