Shanghai investigates ‘unauthorized’ WMP sales

Shanghai police are investigating unauthorized sales of fixed income-based wealth management products by Shanghai Fanxin Insurance Agency Co, the city’s largest insurance agency, after its general manager reportedly absconded to Canada with 500 million yuan ($81.8 million).

The Shanghai branch of the China Insurance Regulatory Commission said on Friday that it recently discovered Fanxin was selling unauthorized WMPs.

These investment products offer higher returns than bank deposits but also involve higher risk.

Analysts said the case may lead officials to tighten regulations on the insurance agency sector.

Regulators will examine the insurance agency sector in line with the findings of the Fanxin investigation, the CIRC said.

“The Shanghai branch of the CIRC said it will cooperate with Shanghai police to investigate the case and protect consumers’ rights,” the Shanghai CIRC office said in a statement on Thursday.

Chen Yi, general manager at Fanxin, has been inaccessible for weeks, but it will require further investigation to find out if she has escaped abroad, according to the CIRC.

Media reports said Chen fled to Canada with 500 million yuan. In a statement dated Thursday, Fanxin said Chen is not the current head of the agency, but it didn’t discuss Chen’s whereabouts or mention whether she had taken money.

The Shanghai branch of the CIRC declined to comment on the connection between Fanxin’s unauthorized WMP sales and the apparent disappearance of Chen.

Fanxin is Shanghai’s biggest insurance intermediary, having sold 480 million yuan worth of insurance policies in 2012, up from 150 million yuan in 2011, according to the company’s website.

Fanxin is operating normally, and some customers have visited its offices to request refunds, said a clerk who would only give the family name Wang.

Market insiders said China sorely needs stricter regulations on insurance agencies.

Agencies have sales channels that insurers themselves lack, and some insurers rely on agencies to expand their revenue. They are an important part of the insurance market, said Yuan Xiao, a sales manager with a Beijing-based insurer. However, some aggressive agencies may take advantage of insurers’ need for revenue.

“Some agents may convert regular premiums into lumpsum premiums without informing either the insurer or the customer and invest the premium in other fields such as real estate, while promising high returns,” Yuan said.

In this way, “the policy becomes an unauthorized wealth management product”, said Yuan.