Katsuhiro Iwayama, Attorney at Law

 ＜Could Your Business Fall Under Insurance Business Regulations?＞

Many businesses consider providing monetary payments or after-sales services—such as repairs or compensation—when products or services purchased by consumers are defective or when certain accidents occur.

While such arrangements may be beneficial and attractive to consumers, in some cases they may fall under the scope of “insurance business”, and therefore require careful consideration.

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<Assessment Criteria>

When evaluating the structure of a business, reference should be made to the Supervisory Guidelines for Small Amount and Short-Term Insurance Providers (see link), specifically the section titled “V. Measures against Unauthorized Operators(Japanese only).”

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According to this section, whether all or part of a business constitutes an insurance business is determined under Article 2, Paragraph 1 of the Insurance Business Act, and attention should be paid to the following factors:

However, the guidelines do not provide a definitive test. Instead, they require consideration of the relevant factors below:

(1)The interpretation of “accidental” in relation to “accidental events”
(2)The interpretation of “collection of premiums”

In practice, these two elements are often met in a formal sense, which may lead to regulatory concerns. Therefore, the following notes (Note1) and (Note2) are particularly important in interpretation.

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(Note 1)
Payments such as congratulatory or condolence money based on established personal or social relationships, which are widely recognized as social custom, and where the amount is considered reasonable under social norms (generally up to JPY 100,000).

(Note 2)
Business models in which payment is collected in advance and services are provided upon the occurrence of an accident are not considered insurance if such services are generally recognized as distinct from insurance transactions. For example, repair services provided as part of product manufacturing or sales, in the event of product malfunction, are typically not classified as insurance.

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That said, there is no single definitive standard for determining whether a business constitutes insurance. Each case must be assessed individually based on precedent and regulatory practice, including whether it falls within the scope of prior cases.

For such purposes, the “Advance Confirmation Procedure for Application of Laws and Regulations (No-Action Letter System)” may be used.

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Examples
Cases where insurance business classification was not found:

• A housing developer providing repair services free of charge for a certain period.

• An MVNO operator collecting fees and offering smartphone repair or replacement services (up to JPY 40,000).

• A gas utility provider offering repair or replacement services for gas appliances under a premium plan (up to JPY 100,000), funded through customer payments.

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Cases where potential applicability of insurance business regulations was indicated:

• A service collecting monthly fees and providing caregiving or life support services through third parties when members require nursing care.

• A travel meta-search platform collecting membership fees and reimbursing cancellation fees as compensation (up to JPY 100,000).

• A rental guarantee provider paying compensation to landlords in the event of tenant death, funded by fees collected from tenants.

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In general, where services are closely tied to a primary product or service, they are less likely to be classified as insurance. However, where payments function similarly to insurance premiums and benefits resemble insurance payouts, regulatory scrutiny may increase—even if the amounts involved are relatively small.

Even in cases involving in-kind benefits, similar considerations may apply.

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If you would like to assess whether your business model may fall under insurance business regulations, please feel free to contact us. While formal confirmation may be obtained through the No-Action Letter process, we can also provide preliminary guidance based on your specific situation.

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