The South Pacific island of Fiji has seen an influx of Chinese tourists in recent years – from just over 4,000 in 2009 to nearly 27,000 last year, reports the Fiji Sun. But the tropical paradise wasn’t a holiday destination for Chen Yi, the young boss of Shanghai’s largest insurance broker. Instead it was her bolt-hole, following allegations that she had absconded with Rmb500 million ($81.8 million) of company money, reports the China Daily.
But her escape from the law was short-lived, reports the newspaper, after she was nabbed by Chinese police working with their counterparts in Fiji.
The company that Chen ran, Shanghai Fanxin Insurance Agency, is at the centre of an investigation by the China Insurance Regulatory Commission (CIRC) after accusations that it was selling “unauthorised” wealth management products with a guaranteed yield of between 7% and 8%, says the South China Morning Post.
Shanghai Fanxin is also accused of running a Ponzi scheme, news of which soon created alarm among customers of the firm’s products.
One of Fanxin’s brokers, surnamed Wu, told the Global Times that he didn’t know what would happen to the friends, family and customers that had bought the company’s products.
“Just as the customers of the insurance agency, I am also a victim anxiously waiting a solution,” Wu told the reporter. He claims his family’s total investment is more than Rmb300,000.
It is a sharp turnaround in fortune for the agency, which once boasted a business model that was celebrated in local insurance circles. It was described by a source to the Economic Observer as “mainly packaging insurance policies into financial products and making commitments to customers on the returns, so the scale grew fast”.
Fanxin certainly enjoyed rapid growth: in 2012 its premium revenue was Rmb480 million, compared to just Rmb150 million the prior year, reports Century Weekly.
The magazine explains that the company would ask for very high commissions on new contracts that it brought in – as much as 150% of the first premium payment. But what is less clear after Chen’s flight to Fiji is how much client money actually found its way into legitimate insurance products.
The company worked with a number of insurance companies, including AEGON-CNOOC and Sun Life Everbright Life, reports Economic Observer. They were attracted by Fanxin’s local distribution network, while Chen was also lauded for her sales skills. She developed detailed instructions on the image that sales staff should present: luxury clothes were standard and even mid-ranking employees were expected to drive a high-end car like a BMW.
“The Fanxin saleswomen may have no experience in the insurance sector, but most of them look like models,” a source told International Finance News.
Chen Yi herself attracted plenty of attention too, with another industry insider telling the Economic Observer that she looked “pretty and frail” which meant that “all the men want to give her a helping hand.”
Fanxin was set up in 2007 but it really got going in 2009 when Chen joined from Pacific Antai Life Insurance where she had been a star employee. Chen brought a number of former colleagues with her. Sales soon started to rocket.
Now, of course, that success is being investigated. While it is too early to say whether Fanxin’s case is unusual, the investigation may reveal similar practices at other insurance brokerages. If so, this could hit smaller insurers hardest as they tend to rely more on agencies like Fanxin to sell their products.
“For the big insurers, their risk control is much better,” Olive Xia, an analyst at Pacific Core-Yamaichi International told the China Economic Review.
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