China’s government insurance firms commit $455 mn fraud

BEIJING - China’s two leading state-owned insurance companies have been found guilty of defrauding more than three billion yuan ($455 milllion) in 2009, the country’s national auditor has revealed.

The financial misconducts were found during the audit of the two largest insurers - China Life Insurance (Group) Company (China Life) and People’s Insurance Company (Group) of China Ltd (PICC) - the National Audit Office (NAO) said Monday.

The reports were produced last year after the NAO audited the 2009 financial records of all subsidiaries and branches of the two state-owned firms, according to the China Daily.

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

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 employees of the two 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.

The company was also 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 that the company had taken effective measures to deal with the problems revealed in the NAO report and had punished those held responsible.

The NAO reports 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, the NAO said.

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.