Aflac says 'rigorous, voluntary review' of postal channel sales began in July
In a regulatory filing, Aflac Incorporated stated that it intends to discuss the following matters with analysts and investors: Near the end of July and prior to the Aflac Incorporated earnings call on July 26, Aflac Life Insurance Japan Ltd. commenced a "rigorous, voluntary review" of postal channel sales. "There has been no change in the focus or intensity of the review since originally launched. The review is focused on policyholders who seek to turn in their old cancer policies in favor of new policies with enhanced benefits and features, specifically, if any policyholders were disadvantaged by the process," the company stated; The 104,000 policies recently referenced in certain media reports regarding Aflac Japan represent all lapsed and reissued policies in the Japan Post Co. Ltd. channel between May 2018 and May 2019. In addition to the 104,000 policies mentioned in media reports, there were an additional 2,600 lapsed and reissued policies sold by Japan Post Insurance Co. Ltd. during the same time period. "Lapse and reissue activity, which increased with the launch of a new and improved cancer policy in April 2018, is a compliant practice that provides the insured a choice to maintain coverage before the new policy takes effect. Thus, under lapse and reissue customers can choose to maintain two policies in force during the waiting period associated with the new policy. Aflac Japan administers lapse and reissue with the customer's best interest in mind to minimize inconvenience, avoid gaps in coverage, and ensure fair value for any premium paid," Aflac said; To enhance customer convenience, Aflac Japan introduced conditional surrender, another documented systems and administrative program, to ensure a smooth transition from old to new policies. "This process ensures no loss of coverage during transition, and only one policy remains in-force at any given time. When conditional surrender was introduced in 2014, only a small number of post offices were handling cancer insurance and were primarily engaged in offering coverage to new customers. Further, JPC and JPI salespersons that would be required to handle simultaneous policy cancellation and reissuance under the conditional surrender program are not currently allowed to directly handle the policy cancellation process. For these reasons, JPC and JPI did not immediately implement the conditional surrender program. Following the expansion to approximately 20,000 post offices and the product revision in April 2018, resulting in great demand for Aflac Japan's improved cancer product, JPC and JPI elected in early 2019 to adopt and install the conditional surrender program beginning late in 2019 once administratively ready to execute," the company said.; The sale of cancer policies continues in the Japan Post Group channel. "Based on daily proposal and new annualized premium trends to date in August, Aflac Japan management has observed a material decline in sales running at approximately 25% of normal daily volumes. Consistent with Aflac Incorporated's statement on the earnings call, while we believe sales will normalize in the future, there is a clear impact while JPI's investigation proceeds and they work to address the issues. Assuming a continuation of these trends to date for the rest of the year, we anticipate that sales in the Japan Post Group channel may decline by as much as 50% from a very strong 2018 given our refreshed cancer product. Based on this same assumption, we anticipate this would result in total third sector and first sector protection sales down in the mid-teens for the year. We continue to see normal retention and are not changing our protection-type first and third sector earned premium growth of 1% to 2% for the year," Aflac stated.