Our Initiatives to Further Enhance Compliance and Risk Management Systems in the Sales Agent Channel

MetLife Insurance Ltd. (Representative Executive Officer, Chairman, President, and CEO: Dirk Ostijn) reports on the status of its initiatives to further enhance its compliance and risk management systems in the sales agent channel.

To support its member companies in sincerely engaging with each customer and continuing to fulfill their social mission, The Life Insurance Association of Japan published "Key Considerations for Further Enhancing Compliance and Risk Management Systems in the Sales Agent Channel" (hereinafter referred to as "Key Considerations") in February 2023. Since then, various follow-up activities have been conducted, and the "Key Considerations" have been updated with new initiatives from each company.

We strive to provide products and services that are truly needed, so that we can be close to our customers and provide them with peace of mind at all times. Furthermore, we consider compliance to be an important management issue in order to keep our promises to customers for many years to come. Under our "Customer-Centricity" principle, we will continue to further enhance our compliance and risk management systems.

Below is an update on our initiatives to date, in line with the "Key Considerations."

Our Initiatives

1. Compliance and Risk Management System

<Content of Key Considerations> "Compliance and Risk Management System" refers to the establishment of organizational structures and the formation of corporate culture that form the foundation of each company's business operations. To meet the strong trust relationships with customers, which are the characteristics and strengths of the sales agent channel, and to continue to deliver unwavering peace of mind, it is essential to develop and maintain a sound compliance and risk management system, including sharing the intended philosophy and values, and establishing a robust organizational structure to implement effective control measures.

(1) Management's Stance and Leading Role

At MetLife, we have established a "Basic Compliance Policy" which positions the establishment and continuous strengthening of our compliance system as a top management priority, and clearly defines the roles and responsibilities of the Board of Directors and management.

Management actively participates in measures to improve business quality by considering and examining risks based on the overall business model, including our own business operations and personnel systems, in various committees (e.g., Non-Financial Risk Management Committee, Risk Management Committee) and working groups.

(2) Role of Managers in Sales Organizations (Branch Managers, Sales Office Managers, etc.)

The responsibilities and authority of managers in sales organizations are clearly defined in regulations, etc. Each sales organization formulates a compliance plan and implements improvement actions for various compliance-related issues.

(3) Initiatives for Fostering a Better Corporate Culture

Based on the results of risk analysis and evaluation of the company's overall compliance and internal control systems and status, we formulate a "Compliance Program" each fiscal year as a concrete action plan for promoting compliance in response to business challenges, thereby strengthening our compliance system.

The implementation status of the Compliance Program and the results of monitoring and analysis of various compliance issues are regularly reported to the Non-Financial Risk Management Committee. Furthermore, the Compliance Risk Management Department regularly checks and follows up on the formulation and implementation status of the plan, and operates to reflect new challenges in the action plan.

We also regularly conduct the "My Voice Survey" (employee awareness survey) to grasp corporate culture and important topics for the company, and a "Compliance Awareness Survey" focused on compliance. By quantifying the health of the organization and providing feedback to each department, we are implementing various initiatives to foster a better corporate culture.

(4) Establishment of a Three-Lines-of-Defense Management System

Based on the consideration of risks related to our own business operations and overall business model, we have established management guidelines, Our Values, codes of conduct, and various compliance-related policies and regulations based on our "Customer-Centricity" principle. These are reported and deliberated in various committees and working groups, communicated to employees, and our company-wide risk management system is built on the foundation of the "Three Lines of Defense."

As the first line of defense, we have established an Insurance Solicitation Management Department responsible for overseeing insurance solicitation management, continuously managing the systems of MetLife and our sales agents. From the second line of defense, the Compliance Risk Management Department monitors the Insurance Solicitation Management Department quantitatively and qualitatively, provides advice based on an objective perspective, and works to prevent and reduce misconduct and accidents through early detection of issues related to insurance solicitation and recurrence prevention measures.

*Three Lines of Defense First Line of Defense: All business execution departments and all officers and employees Second Line of Defense: Risk Management Department, Compliance Risk Management Department Third Line of Defense: Audit Department

2. Evaluation of Compliance Risks

<Content of Key Considerations> "Evaluation of Compliance Risks" refers to the appropriate evaluation of inherent risks in a company's business and the impact and frequency of inappropriate events that should be prevented. In the concept of compliance risk management, which involves building appropriate systems for each risk, it is required that each company evaluate risks in accordance with the characteristics of the sales agent channel and its own specific traits.

As part of our efforts to resolve compliance issues and improve compliance awareness, including corporate ethics, we conduct risk analysis and evaluation of the company's overall compliance and internal control systems and status.

The implementation status of the Compliance Program and the results of monitoring and analysis of various compliance issues are regularly reported to the Non-Financial Risk Management Committee. Furthermore, the Compliance Risk Management Department regularly checks and follows up on the formulation and implementation status of the plan, and operates to reflect new challenges in the action plan.

3. Development and Implementation of Controls for Compliance Risks

<Content of Key Considerations> "Development and Implementation of Controls for Compliance Risks" refers to initiatives related to specific control measures for compliance risk management based on the control environment and risk assessment. To prevent inappropriate conduct in the sales agent channel, it is essential to develop and implement robust control measures, taking into account the results of the aforementioned risk assessment.

(1) Clarification of Business Rules

The "Regulations on Handling Misconduct" clearly define prohibited acts such as "loans, deposits, investments, etc. involving money, securities, or other valuable items with customers," "introduction or arrangement of financial products or other speculative products," and "loans between officers and employees," and these are subject to disciplinary action for misconduct.

We have created a "Compliance Manual" that takes into account the characteristics of each job role and sales channel, including management and sales departments, to be used as a guide when in doubt during daily operations. This manual is always available for reference.

To alert external stakeholders, we have posted information on our website stating that our sales agents no longer accept cash directly from customers and that we prohibit investment referrals, etc. We also widely disseminate this information through various communications to existing customers.

(2) Education and Training

We conduct compliance training for all employees, including sales agents, to instill compliance awareness, including social norms. We also conduct various mandatory training programs by level and theme to deepen employees' compliance awareness.

Directors deepen their understanding of recruitment-related laws and regulations and our recruitment management and challenges through continuous training, thereby strengthening the supervisory function of the Board of Directors. In addition, external directors receive separate training, including sales demonstrations by sales agents.

(3) Personnel and Remuneration (Award) System

In the personnel and remuneration (award) system for managers, a mechanism is in place to reflect the evaluation of sales agents' thorough compliance in both quantitative and qualitative aspects. Furthermore, in the performance evaluation of sales agents and their supervisors, business quality evaluations such as contract renewal status and the occurrence of inappropriate events are included, ensuring a system that does not overly emphasize sales performance.

(4) Management of Sales Agent Activities

Managers of each sales office conduct annual inspections of their office's management status and ensure thorough management of sales agents' activities through the activity management system in their daily management duties. We also conduct regular one-on-one meetings with individual sales agents to provide detailed guidance and support regarding their activities and the quality of their work.

Each sales office where sales agents are assigned has an Office Manager responsible for solicitation management and internal affairs management. In cooperation with the Insurance Solicitation Management Department, they monitor the status of each sales office and the activities of sales agents, promote the penetration of risk awareness at the site level, and implement timely and on-site preventive measures.

4. Monitoring of Compliance Risks and Response to (Early Signs of) Misconduct

<Content of Key Considerations> "Monitoring of Compliance Risks" refers to the supervision of the development and functional status of a company's compliance and risk management system, including its risk assessment and control status. Due to environmental changes such as the spread of COVID-19 and the increase in remote work opportunities due to digitalization, the status of risks and the effectiveness of control measures may change. To maintain an effective compliance and risk management system, appropriate monitoring is required, including information on (early signs of) misconduct obtained through controls.

(1) Monitoring of Compliance Risks

The Insurance Solicitation Management Department monitors the activities and work status of sales agents with potential solicitation concerns, complaint status, etc., using various solicitation management indicators. They identify early signs, verify them, provide improvement guidance to sales agents with issues, and conduct inspections at sales offices for confirmation and verification.

In particular, from the perspective of early detection and prevention of financial misconduct and investment referrals, we monitor a risk profile database that aggregates various solicitation management indicators related to major incident risks and solicitation quality risks, and are advancing the sophistication of risk detection mechanisms using AI.

We monitor for unusual trends in the frequency and amount of transactions, such as policy loans and conservation procedures involving surrenders or reductions, analyze trends, share information about sales agents with concerns among relevant parties, and strengthen early detection by directly confirming with customers in cases of significant risk concerns.

(2) Response to (Early Signs of) Misconduct

Reporting procedures when misconduct (including concerns) is identified are stipulated in the "Regulations on Handling Misconduct." Investigation methods are also 규정화된 (regulated). During investigations, if necessary, we conduct discreet inquiries not only of the sales agent concerned but also of their customers and colleagues.

In addition, we implement measures to enhance the effectiveness of recurrence prevention, such as sharing case examples at the sales office where the incident occurred, conducting accident prevention training, and revising rules.

Management discusses monitoring and analysis results of various compliance issues in the Non-Financial Risk Management Committee, chaired by the Executive Officer in charge of Risk Management and Compliance, and the Risk and Control Committee, chaired by the CEO. The results are then shared with the Board of Directors and deliberated as necessary.

5. Communication

<Content of Key Considerations> "Communication" here refers to the management system and daily operational initiatives for timely and appropriate transmission of necessary information to internal and external stakeholders. Lack of communication due to internal environmental factors can hinder the deterrence and detection of misconduct. Therefore, it is essential to build an environment and system for appropriate communication both internally and externally (with customers and various stakeholders).

(1) Internal Communication

We provide opportunities for dialogue between management and employees through face-to-face and online channels, promoting understanding of the intent and background of various measures through direct exchange of opinions with management. We also conduct surveys to measure employee engagement and the penetration of various compliance-related measures. By regularly checking the communication status between superiors and subordinates and within organizations, providing feedback on results, and implementing countermeasures for issues, we are working to further improve engagement and the penetration of compliance-related measures.

We maintain close cooperation between the Insurance Solicitation Management Department and the management bases of sales agents in each region. Through various meetings and informal daily communications, we promote the penetration of key measures for sales agent management. We also share points for risk detection at the site level and necessary responses when detected through sharing examples of major incidents, thereby strengthening early detection and prevention of major risks.

(2) External Communication

On our website, we clearly display various inquiry contact points and frequently asked questions. We also strive to disclose information about our compliance and risk management system, such as publicizing inappropriate events that have occurred within the company and our recurrence prevention measures, depending on the severity of the incident.

We have also established a wide range of inquiry contact points and a system to handle various inquiries.

* Customer Service Center * Internet Service Desk * Customer Consultation Office * Website Inquiry Desk * WEB Service for Policyholders * Web Form Reception * Notification Support Desk

(3) Whistleblower System

To enhance the effectiveness of the whistleblower system, we ensure that whistleblowers do not face any disadvantages due to their reporting. In addition to internal reporting and consultation channels, we have established external channels to create an environment where people can report with peace of mind.

Furthermore, in accordance with laws and regulations, we designate officers and employees who handle whistleblower cases as "personnel engaged in such activities" and have them perform their duties. Through regular training, we ensure the appropriateness of responses and deepen understanding of whistleblowing, thereby working to secure an appropriate system for internal reporting.

6. Audit

<Content of Key Considerations> The "Audit" department plays a role in verifying whether the compliance and risk management systems and initiatives of business departments (first line) and compliance departments (second line), such as sales organizations, are appropriately and effectively established and implemented, and in leading to improvements, within the three-lines-of-defense management system. For the effective development of the compliance and risk management system in the sales agent channel, it is also required that the audit department understand the characteristics of the sales agent channel and the environment surrounding the company and exercise its role.

When auditing the effectiveness of initiatives in the Compliance Risk Management Department and sales departments, the Audit Department collects information by attending general meetings held by business departments (first line) and the Compliance Risk Management Department (second line), and holding regular information exchange meetings. Based on this information, they conduct risk assessments from a forward-looking perspective, formulate an annual audit plan, and carry out audits. From the perspective of grasping the penetration of risk culture, they also verify whether the systems and initiatives related to the first and second lines are appropriately and effectively established and implemented through interviews with employees at headquarters and sales offices.

We have established a system to collect and utilize external expertise in our internal audit activities by reporting audit results to the Audit Committee and the Board of Directors, which include outside directors, and by utilizing external service providers.

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About MetLife Japan

MetLife Japan began operations in 1973 as the first foreign-affiliated life insurance company in Japan. Today, as the Japanese subsidiary of MetLife, a leading global life insurance group, we are dedicated to being close to our customers and helping them choose the optimal coverage. Through diverse sales channels, we strive to offer innovative products that can respond to a wide range of risks for individual and corporate customers. www.metlife.co.jp