Society

Leading insurers guilty of 3 billion yuan fraud

By Yan Jie (China Daily)
Updated: 2011-02-01 07:27

Companies say 352 employees have already been punished

BEIJING - China's national auditor has revealed that two of the country's largest insurers committed financial misconduct involving more than 3 billion yuan ($455 million) in 2009.

The revelations were contained in two reports published by the National Audit Office (NAO) on Monday.

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The reports were produced last year after the NAO audited the 2009 financial reports of all subsidiaries and branches of China Life Insurance (Group) Company (China Life) and People's Insurance Company (Group) of China Ltd (PICC).

Both companies are State-owned and among the biggest insurers in China.

The misconduct and non-compliance in operations and accounting included expense frauds, false premium increases and fake claim settlement cases, the reports found.

The reports cited other financial problems, including so-called xiaojinku (literally "small coffer"), or funds secretly kept off account books to avoid regulation. These funds are widely considered to be prone to corruption.

A total of 352 unidentified employees with the companies have been held responsible and been punished, some with dismissal, the reports said.

At China Life, false premium increases worth 278 million yuan were made in 2009, and eight employees were held responsible, according to one of the two NAO reports on the company.

As well, the company was found to have set up funds not recorded in account books totaling 5.1 million yuan. In 2009 premium income worth 254,700 yuan went missing at the branch in Wuhan, capital of Hubei province.

China Life Insurance Co Ltd, a Shanghai-listed company under the China Life Group, said in a statement on Jan 25 that the company had taken effective measures to deal with the problems revealed in the NAO report on the company and had punished those held responsible.

The NAO reports have also revealed misconduct involving more than 1.9 billion yuan by PICC in 2009.

At the company's branch in Qiyang county in Hunan province, employees had collaborated with local officials to use fabricated policies to defraud the local financial bureau of about 9 million yuan in fiscal subsidies, said the report.

In addition, several of the company's branches in Yunnan province were found to have used bogus invoices to reimburse expenses of more than 16 million yuan claimed for receptions, gifts and employees' income.

PICC Property and Casualty Co Ltd, a Hong Kong-listed unit of PICC, confirmed in a statement on Jan 26 that the problems revealed in the NAO report were accurate. The company also said it had completely rectified the problems.