ASSURERS TOLD TO CHECK LIFE POLICIES SOLD WITH CONSENT

Japan’s Financial Services Agency (FSA) has urged the country’s life assurers to check that clients of consumer loan companies have given their consent to life policies being taken out in their name. The FSA has stepped in because it has been claimed that moneylenders are effectively using the lives of borrowers as collateral when making a loan. It has asked assurers to sign up customers for consumer loan companies only if it can be shown that the borrower is aware of the policy being taken out and has given his or her consent. Although loan agreements usually have a section in the loan agreement that states the lender will take out a life policy on the borrower, the FSA said that borrowers were often unaware of the terms. Insurers are not allowed to cover debts of more than ¥3m for consumer loan companies. Possible amendments to the system include the separation of the loan application from the letter of consent, and a change in the way that unmanned “loan booths” are operated to ensure that borrowers have indicated their willingness for a life policy to be taken out on their behalf.