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China fines top nonlife insurers for unfair competition, doctoring accounts

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China fines top nonlife insurers for unfair competition, doctoring accounts

The China Insurance Regulatory Commission slapped penalties on a handful of top nonlife insurers in the country for creating unfair competition in commercial auto insurance and for doctoring financial reports.

PICC Property & Casualty Co. Ltd., Ping An Property & Casualty Insurance Co. of China Ltd., China Pacific Property Insurance Co. Ltd., Taiping General Insurance Co. Ltd. and Zking Property and Casualty Insurance Co. Ltd. were fined a total of 8.67 million yuan, the CIRC said in Feb. 23 statements. Some of their branches were also subsequently banned from underwriting new commercial auto policies for three months, the regulator said.

The Chinese government crackdown on misconducts among life and nonlife insurers appears to be intensifying. Earlier in February, the CIRC warned 19 property and casualty insurers over their products, having already banned Ping An P&C from changing its product offering for three months. More recently, the CIRC said it will take over Anbang Insurance Group Co. Ltd. for up to two years, saying the company "broke insurance laws" and in turn damaged its ability to pay claims and debt.

"The penalties [to the top three P&C insurers] is quite stringent compared to before," said Hong Jinping, an analyst at Huachuang Securities in Shenzhen.

In Feb. 23 statements, the CIRC said PICC P&C and its Sichuan branch; Ping An P&C and its Ningbo branch; China Pacific Property and its Fujian branch; and Taiping General and its Sichuan branch were found to be providing or guaranteeing policyholders with premium rebates and interest payments that are not included in insurance contracts when selling commercial auto insurance.

Auto insurance, including both commercial and compulsory, is the single largest revenue generator for Chinese P&C insurers, accounting for nearly 80% of the segment's seven largest players' premium income in 2016.

Moreover, the regulator said PICC P&C and its Sichuan branch, Ping An P&C and its Sichuan branch, China Pacific Property and Taiping General have fabricated financial disclosures.

The CIRC fined PICC P&C and its Sichuan branch 2.07 million yuan; Ping An P&C and its branches 2.7 million yuan; China Pacific Property and its Fujian branch 1.9 million yuan; and Taiping General and its Sichuan branch 1.8 million yuan.

The insurance watchdog ordered Ping An P&C's Ningbo and Sichuan branches, PICC P&C's Sichuan branch, China Pacific Property's Fujian branch and Taiping General's Sichuan branch to refrain from underwriting new commercial auto insurance business for three months.

Additionally, the CIRC took a dim view of Zking P&C's telemarketing practices in 2015, which misled customers. Zking P&C and a responsible official will be fined 200,000 yuan as a result.

For the 11-month period of 2017, PICC P&C, Ping An P&C and China Pacific Property were ranked as the three biggest Chinese nonlife insurers by premium income, with 315.99 billion yuan, 193.23 billion yuan and 93.5 billion yuan, respectively. The three had a combined market share of 63.6% over the period.

"The insurance industry is still under strict regulatory scrutiny and high volumes of business exposed the problems at the three insurers more easily," Hong said.

She added, however, that the order to halt new business will only affect regional branches, thereby minimizing the impact.

As of Feb. 23, US$1 was equivalent to 6.33 Chinese yuan.