Japan's Financial Services Agency has told major insurance company Sompo Japan to examine whether its simplified damage assessment policy for the scandal-hit used-car dealer Bigmotor was appropriate.

Repair mechanics at Bigmotor are suspected of intentionally damaging customer cars in order to charge excessive fees and make overstated insurance claims.

On Monday, the FSA ordered seven insurance companies which had partnerships with Bigmotor to report whether their dealings with the used-car dealer adhered to the Insurance Business Act.

Sources say the agency thought it was problematic that Sompo had set up a team to process Bigmotor's insurance claims and considerably simplified procedures to determine insurance payments.

Under the framework introduced in 2019, Bigmotor only had to prepare an estimate for repairs and send it to Sompo with photos.

Sompo has sent 37 of its staff to Bigmotor since 2011. The insurance firm suspended business with the dealer when the alleged fraud came to light last year. But it later resumed business without conducting a detailed investigation.

The FSA has told Sompo to also report on the circumstances leading up to the resumption of business with Bigmotor.