Sompo Japan Insurance Inc. President Giichi Shirakawa will step down to take responsibility for the handling of a high-profile insurance fraud case involving used car dealership and repair chain Bigmotor Co., the insurer's parent company said Friday.

The major Japanese insurer's close relationship with Bigmotor has come under scrutiny since the dealership chain was found to have charged excessive repair fees after intentionally damaging cars and to have made fraudulent insurance claims.

Sompo Japan, which had loaned out many employees to Bigmotor, has been accused of overlooking the dealership's wrongdoings to avoid damaging their business ties.

At a press conference in Tokyo, Shirakawa, 53, said he offered to resign over the inappropriateness of his decision to resume business with Bigmotor despite knowing that the allegations of fraud that emerged last year may be true.

"I was not able to take a firm attitude toward Bigmotor because I feared potential repercussions," said Shirakawa, who became the president of Sompo Japan in April last year. The specific date of his resignation is yet to be determined.

The scandal, which has been widely reported over the past few months, has sent shock waves across the nation, resulting in the resignation of Hiroyuki Kaneshige, the dealership's founder and president, in July amid mounting outrage among customers.

Sompo Japan Insurance Inc. President Giichi Shirakawa is pictured at a press conference in Tokyo on Sept. 8, 2023. (Kyodo)

Bigmotor's employees were scratching the bodies of vehicles with screwdrivers and damaging their surfaces with golf balls to pad repair charges, according to a report compiled by an independent panel of lawyers appointed by the dealership.

The scandal shed light on a cozy relationship between Sompo Japan and Bigmotor, which sold auto liability insurance for the insurer as an agent. Sompo Japan, in turn, introduced its customers to Bigmotor to repair their cars.

Of the total worth of insurance the dealership sold in fiscal 2022, about 60 percent was for Sompo Japan, according to the insurer.

Shirakawa said he resumed business with Bigmotor in July last year, one month after the company's decision to halt referring its customers to the dealership for car repair, for fear of losing business to its rival insurers.

"I was afraid of a significant drop in sales," Shirakawa said. "It was a mistake."

Japan's Financial Services Agency is looking into the matter and is slated to conduct an on-site inspection of the insurer later this month.

At the press conference, Kengo Sakurada, CEO of Sompo Holdings Inc., the parent of Sompo Japan, said he is partly responsible for the scandal as he oversees the subsidiary, but said he will wait for the results of an investigation by external lawyers to see whether he should be subject to any punitive measures.

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