NU Online News Service, March 23, 2004, 5:42 p.m. EST – The U.S. Trade Representative should help persuade Japan to rein in its postal life insurance system.[@@]

The American Council of Life Insurers, Washington, today launched an effort to make that case by issuing a study about the Japanese postal life system and holding a press conference on the topic.

Japan is studying ways to privatize the postal life system, which is popularly known as Kampo, but Kampo is taking advantage of the current lack of restraints by expanding efforts to compete with private insurers, ACLI President Frank Keating said at the press conference, according to a written version of his remarks.

Many Japanese consumers view Kampo as a welcome island of financial stability, but both foreign and domestic private life insurers argue that Kampo’s exploitation of its many privileges violates trade agreements that call for Japan to offer a level playing field for private insurers.

“We have been patient long enough,” Keating said. “The process of privatization must go forward without further expansion by Kampo.”

Once Japan privatizes Kampo, Japan must keep Kampo from using its huge size to dominate its competition, Keating added.

Japan established Kampo in 1916. The system now controls the equivalent of more than $1 trillion in assets and has about 73 million policies in force.

Kampo charges somewhat higher prices for its policies than private insurers charge, but it uses high-pressure sales tactics, celebrity endorsements, a network of more than 27,258 sales reps and aggressive underwriting strategies and investment performance assumptions to beat out both private foreign and domestic competitors, the ACLI says.

Japanese Prime Minister Junichiro Koizumi seems to be making a serious effort to privatize and reform the Japanese postal service and Kampo, but the ministry that regulates Kampo cut across Koizumi’s efforts in January by approving a new Kampo product, Keating said.

The product is a fixed-term, whole life policy that comes with an optional health benefits rider. The product resembles private-sector products and has the advantage of coming with a government-backed guarantee, Keating said.

The Japanese government has promised to reform Kampo, but, so far, it has done so mainly by applying “private sector” management techniques while continuing to offer Kampo many advantages over private, for-profit competitors, Keating said.