Japan's financial watchdog on Tuesday began searches at 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 purposely ignoring the fraudulent practices to avoid damaging the relationship.

Financial Services Agency inspectors enter an outlet of Bigmotor Co. in Tama, western Tokyo, for an on-site inspection on Sept. 19, 2023. (Kyodo)

Finance Minister Shunichi Suzuki, who oversees the financial watchdog, told reporters the agency will conduct a thorough investigation, saying, "What is the most important thing is to uncover the facts."

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 as well as 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.

The latest move follows the transport ministry's on-site investigations at Bigmotor offices across Japan in July and police searches of the company's headquarters in Tokyo last week.

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.

Investigations at both companies could last for several months, FSA officials said.

Bigmotor employees were found to have scratched the bodies of vehicles with screwdrivers and damaged panels with golf balls to increase repair bills, 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.

Related coverage:

Police search Bigmotor headquarters amid scandal over withered trees

Sompo Japan president to resign over Bigmotor insurance fraud scandal

Japan fair trade body probes scandal-hit Bigmotor over subcontracts