On Monday, China’s audit office found “improper and illegal activities” involving the nation’s two largest insurance companies: People’s Insurance Co. of China and China Life Insurance. The audit found that SNY3.02 billion ($458 million) had been involved with the illicit activity.
Officials with the National Audit Office said that the companies were involved in an array of improper settlements, illegal international investments, and selling fraudulent insurance policies. The crimes were found after an inspection of the books from 2009. 350 people directly involved in these events were taken into custody – their punishment has not been specified.
The companies made no statement regarding these events and will continue to operate business as they normally do on a day to day basis.
Analysts suggest that the issue will be ignored by investors as the insurance market in China has potential for massive growth. Both companies have seen growth in premiums – PICC with as much as 35%. China Life currently holds 40% of the life insurance market in the nation and is expected to take more in the coming years.
These violations have raised concern amongst some Chinese citizens over the authenticity and legality of the policies they currently hold. They are worried about where their money is going and what it is being used for. Without transparency, trust is quickly evaporating from businesses that are found to be conducting shady business. While investors may not care, the people of China surely do, and the actions of these companies may have an impact on their wellbeing.