Insurer Caught Eavesdropping on Government Team Probing Finances

(Beijing) — The cat-and-mouse game that has been going on for years between China’s regulators and insurers has just been elevated to a whole new level.

The Shandong provincial bureau of the China Insurance Regulatory Commission (CIRC) disclosed that the subsidiary of state-owned Yingda Taihe Property Insurance Co. Ltd. in Weifang had planted two eavesdropping devices in a room prepared for inspectors to examine the company’s books to assess its financial situation, local media said.

The company has fired four employees in the bugging scheme, including its alleged mastermind.

Officials sent down by the insurance regulatory body to examine the local subsidiary in December and January found a voice recorder and an iPhone taped under their chairs, Jinan-based official media outlet Qilu Evening News reported, citing an anonymous source.

While there have been sporadic media reports about corrupt officials and companies trying to dodge the regulator’s scrutiny, it’s rare for an insurance company to go so far as to monitor investigators’ conversations.

“The Weifang subsidiary must have some really dirty laundry” to hide from the inspectors “for it to dare to make such a risky move,” a CIRC official who wasn’t involved in the inspection told Caixin. “The purpose was probably to get tips about what the inspectors have found at the company and then act accordingly.”

The regulatory body has indeed discovered that the company has kept a large amount of money off its balance sheet and lied about its expenditures, according to a statement widely circulated online.

But what irked the officials more was the insurer’s resorting to below-the-belt tactics to thwart its probe. The furious regulator lambasted the insurer for “taking profoundly inappropriate measures to disturb, hinder and derail regulatory investigations.”

At a time when the government was promoting the rule of law, senior executives and employees of this state-owned financial enterprise have adopted "immensely inappropriate means to block the regulatory process," the CIRC said in a statement. “They should really re-evaluate their work ethics, internal discipline, employees’ sense of civic duty and understanding of the law.”

According to China’s Insurance Law, an insurance company obstructing official investigations could face a fine of up to 500,000 yuan ($72,100), or have its business suspended and operating license revoked in more-severe cases.

In response to the CSRC’s disclosure, the insurance company said it fired four employees including its deputy manager, Lu Wentao, who the regulator claimed came up with the eavesdropping idea, state-run China National Radio said.

The mother company of the property insurer was founded in 2009 in Beijing. All its 31 shareholders are subsidiaries of the powerful State Grid Corp. of China, the country’s largest power distributor, according to the central government’s website.

Contact reporter Chen Na (nachen@caixin.com)