Japan's financial watchdog on Tuesday searched offices of major used car dealer network Bigmotor Co. and casualty insurer Sompo Japan Insurance Inc. as part of a high-profile insurance fraud investigation.
The Financial Services Agency aims to scrutinize ties between the companies after Bigmotor was found to have charged excessive repair fees by intentionally damaging cars and making fraudulent insurance claims.
Sompo Japan, which sold a large portion of its auto insurance through Bigmotor, is accused of knowingly overlooking the fraudulent practices to avoid damaging the relationship.
Bigmotor's founder and president, Hiroyuki Kaneshige, stepped down in July, while Sompo Japan Insurance President Giichi Shirakawa announced his intention to resign earlier this month.
Financial regulators will also interview Kengo Sakurada, CEO of Sompo Holdings Inc., the insurer's parent company, to examine its corporate governance practices and how and when the company responded after finding out about the scandal.
"We will respond to the FSA's inspection sincerely and strive to recover customer damages," Sompo Japan said in a statement.
On Tuesday, several FSA inspectors entered the headquarters of Sompo Japan in Tokyo's Shinjuku Ward and an outlet of Bigmotor in Tama, western Tokyo. The Tama location is home to the company's insurance agency businesses.
Bigmotor employees were found to have scratched the bodies of vehicles with screwdrivers and damaged panels with golf balls to increase repair charges, according to a report compiled by an independent panel of lawyers appointed by the company.
The scandal shed light on a mutually beneficial relationship between Sompo Japan and Bigmotor, which sold auto liability insurance for the insurer as an agent. Sompo Japan, in turn, directed customers to Bigmotor for car repairs.
