Administrative action against Toyota Mobility & Good Speed

The Financial Services Agency, through the respective Financial Bureaus, has issued administrative orders against Good Speed and Toyota Mobility Tokyo, both of which are involved in car sales, repair, and also operate as insurance agencies.

Both companies have been found to have significant issues across multiple areas, including: improper insurance claims, weak internal controls (particularly with the 3 lines of defense), inadequate compliance, and poor customer data protection.

The administrative orders mandate comprehensive investigations, implementation of robust improvement plans, and strict reporting schedules. The issues highlight significant failures in corporate governance and a lack of focus on regulatory compliance, potentially stemming from prioritization of sales over proper operational and ethical practices.

1. Common Themes and Issues

Insurance Fraud and Misconduct: Both companies have a history of improper insurance practices, focusing on the overbilling of insurance companies

• Good Speed: Initial investigations by the company found 30 and then 91 incidents of improper billing after internal audits. The investigations themselves were found to be flawed, with the findings being manipulated and the inquiries incomplete.
• Toyota Mobility Tokyo: The company had previously acknowledged overbilling claims due to high-performance paint and body coating, and acknowledged in a re-examination of all past claims, finding 4,820 additional instances of overbilling.

Weak Corporate Governance: Both companies showed a failure of the 3 lines of defense model, a fundamental problem in the development of sound corporate structure.

• Good Speed: The board of directors did not establish clear roles and responsibilities, particularly concerning the "business contact committee" and the insurance business sector. Internal audit departments were under-staffed, meaning that risk based audits were never properly implemented. The lack of resources in the insurance business sector meant that this section of the business lacked the training and tools to be able to properly execute their roles.
• Toyota Mobility Tokyo: The executive board's focus was on their core vehicle sales business, and regarded the insurance business as a secondary sector, and did not assign the proper resources to support the legal requirements of the sector.
• In both cases, there is evidence that internal control processes were not implemented and the organizations were not capable of detecting breaches of compliance.

Inadequate Insurance Management: Both companies failed to establish proper management over their sales of insurance policies, including failing to adequately monitor and train sales staff.

• Good Speed: Management neglected to provide necessary training to insurance salespeople. They prioritized sales, meaning there was no system in place for monitoring or flagging any improper sales activities. There was a lack of information provided to customers regarding the benefits and detriments of specific insurance policies, meaning they often sold suboptimal policies to customers.
• Toyota Mobility Tokyo: There was a lack of oversight and training in the insurance business, with staff giving varied and sometimes inaccurate advice to customers regarding insurance sales. There was a failure to monitor for compliance with all legal requirements, meaning that staff could be breaking the law without being corrected.

Poor Customer Data Protection: Both companies had severe deficiencies in their personal information management policies.

• Good Speed: It was determined that the president of the company, who was the head of personal information protection, failed to ensure there were sufficient human resources to properly administer the policy. This meant that the company was found to be negligent in the safe management of customer information.
• Toyota Mobility Tokyo: There was a lack of awareness of the basic guidance on managing personal data. Staff used their own discretion when deciding how to manage customer data, and failed to properly administer the various safeguards laid out in the regulations. Furthermore, the company failed to secure online storage of customer data, resulting in one instance of a leak of over 23,000 customer records being accessed and another instance of a personal USB drive containing 9,489 records being misplaced.

Inadequate Complaint Handling:Both companies failed to establish clear policies for recording, analyzing and responding to customer complaints.

• Good Speed: There was no designated person or department to handle complaints, and there was no effort to use the complaint process to improve the company's operations.
• Toyota Mobility Tokyo: There was a lack of awareness of the importance of handling complaints properly. There were no systems in place to either record or analyze complaints, and no actions taken to determine the root causes and how to avoid them in the future.

2. Administrative Orders and Required Actions

Both companies received similar administrative orders, mandating:

• Thorough Investigation: A comprehensive investigation into all improper cases, including insurance fraud and all associated issues. This is to be followed with an analysis of the underlying causes.
• Accountability: Clear identification of management's responsibility in these issues and resulting consequences.
• Cultural Shift: Cultivation of a corporate culture that prioritizes compliance and customer protection.
• Robust Systems: Establishment of appropriate insurance solicitation, customer information management, and complaint handling systems.
• Governance Enhancement: Fundamental strengthening of the management structure to ensure the implementation and maintenance of required improvements.
• Improvement Plans: Submission of improvement plans by February 21, 2025, and subsequent implementation.
• Progress Reports: Quarterly progress reports on the improvement plans, with the first report due by the end of May 2025.

3. Key Differences

• While both companies have significant issues with their governance and compliance frameworks, Toyota Mobility Tokyo appears to have a broader data leak issue, stemming from its failure to understand or apply basic policies for the protection of personal information.
• Good Speed also appears to have manipulated an internal audit to meet external pressures from banks, rather than acting to properly identify and fix internal issues.

Conclusion

These administrative actions highlight serious deficiencies in both companies' operational and ethical frameworks. The core of the problem appears to be a failure of corporate governance, inadequate compliance structures and the prioritization of profit over ethical and legal obligations. Both companies must implement significant improvements in their internal control systems, training, compliance, and customer protection practices to meet the requirements of the Financial Bureaus and regain public trust. The imposed reporting requirements will be key in evaluating the companies’ commitment to reform and effectiveness in changing their approach to business.

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