The Life Insurance Association of Japan has asked each life insurance company to state actual yield rates in their advertising materials, starting in April.

First, the move will be applied to the kind of foreign currency-denominated life insurance whose premiums are to be paid in a lump sum when contracts are signed — a main item in the product lineup, reported The Yomiuri Shimbun.

Efforts should be made to accurately explain the features of each product and restore trust in such investments. There has been a sharp increase in problems involving foreign currency-denominated insurance primarily intended as savings, a financial instrument aimed at managing the premiums deposited by customers through transactions based on the US dollar or other foreign currencies.

Most complaints concern the lack of adequate explanations about the risks involved. Insurance payments to policyholders could be reduced if there is a rise in the value of the yen. There are also concerns that cancelling an insurance contract before maturity could cause a loss of principal. It seems that only high yields on such products have been emphasised to customers, with their negative aspects not sufficiently explained.

If financial institutions continue their inappropriate sale of financial products for the sake of immediate commission gains, it could hamper the trend toward a shift from savings to investments. The Financial Services Agency has started shoring up supervision over banks and life insurance companies.