Summary
Aflac Incorporated (AFL) issued an 8-K filing on August 22, 2019, addressing a voluntary review initiated by Aflac Life Insurance Japan concerning postal channel sales, specifically lapsed and reissued cancer policies. The review focuses on whether policyholders were disadvantaged when trading old cancer policies for new ones with enhanced benefits. The company clarified that the reported 104,000 lapsed/reissued policies between May 2018 and May 2019 through Japan Post Co. Ltd. (JPC), along with an additional 2,600 through Japan Post Insurance Co. Ltd. (JPI), represent a compliant practice aimed at customer convenience and uninterrupted coverage, especially following the introduction of an improved cancer policy in April 2018. While the sale of cancer policies continues, Aflac Japan has observed a material decline in sales within the Japan Post Group channel, estimating a potential 50% decrease for the year. This decline is attributed to an ongoing investigation by JPI. Despite this, Aflac Japan is not anticipating any disruption to its long-term alliance plans with Japan Post Holdings Co. Ltd. (JPH) and the associated capital commitment. The company reiterated its existing guidance for retention and earned premium growth for protection-type policies.
Key Highlights
- 1Aflac Japan is conducting a voluntary review of postal channel sales, focusing on lapsed and reissued cancer policies to ensure policyholder fairness.
- 2The review covers approximately 106,600 lapsed and reissued policies (104,000 via JPC, 2,600 via JPI) between May 2018 and May 2019.
- 3Lapse and reissue is described as a compliant practice offering customers continuity of coverage and choice, especially relevant after an improved cancer policy launch in April 2018.
- 4Sales in the Japan Post Group channel have seen a material decline, estimated at about 25% of normal daily volumes, with a potential full-year decrease of up to 50% compared to 2018.
- 5The company anticipates total third and first sector sales to be down in the mid-teens for the year, assuming current trends continue.
- 6Aflac Japan continues to see normal retention rates and is maintaining its earlier guidance for protection-type first and third sector earned premium growth of 1-2%.
- 7Aflac does not anticipate any disruption to its long-term alliance plans with Japan Post Holdings Co. Ltd. (JPH) or JPH's capital commitment.