The Financial Services Agency drafts a policy on sales pitches and explanations of risks.

With the insurance sector opening to new players and sales channels, the Financial Services Agency is drafting a set of rules to shield consumers from risk.

A primary objective is to prevent sales of ``inappropriate'' insurance policies to people on limited income, such as pensions.

The guidelines cover sales pitches as well as full explanations of financial risks.

One example is not to recommend to pensioners products that could fall below the initial purchase value.

The agency is asking insurers to sell only products that are appropriate to the buyer's assets and understanding.

Now all it can do is to encourage compliance, say officials. Under current insurance law, business practice is left to companies' internal rules.

The agency's objective is to prevent financial loss for people entering expensive contracts for life insurance policies that they do not fully understand.

Once the new regulations are adopted, the agency will be able to subject violators to administrative sanctions.

In some cases, companies could be ordered to improve their overall business practices.

In the latter half of the 1980s, there were many instances of elderly people sustaining losses from variable rate insurance policies. The payouts of such policies are based on the performance of investment portfolios held by the insurance companies. These can vary widely.

Buyers of such policies have complained that the risks were not properly explained.(IHT/Asahi: January 31,2005)