Saturday, June 29, 2019

Pig Insurance Fraud Uncovered in Sichuan

A crackdown on pig insurance fraud is underway in China's Sichuan Province after officials uncovered a "chain of corruption" that collected insurance money based on false reports of dead pigs.

China began offering subsidized insurance for sows in 2007 and later extended coverage to fattening hogs. Insurance is sold by insurance companies, but the government subsidizes 80 percent of the premiums. The program is intended to stabilize production by reducing risk for farmers and to prevent diseased pigs from being sold and slaughtered. Insurance for sows and commercial hogs was included on the Ministry of Agriculture and Rural Affairs' (MARA) list of key rural policies for 2019. There has been no public discussion of whether insurance companies have been paying out claims on the large numbers of pigs that died of African Swine Fever since August 2018. Unspecified "improvement" of hog insurance was one of the policy measures to promote recovery of hog production offered at a MARA press conference this week.

On June 20, a special provincial rectification team met in Sichuan's Deyang City to learn about the pig insurance fraud case discovered in a local anti-corruption sweep. In a so-called use of "big data," Deyang officials compared the number of insurance payouts on dead pigs over 2016-18 with records of carcass disposals and found that insurance payouts exceeded the number of buried carcasses. Deyang mobilized dozens of communist party and government officials, police, and insurance company personnel who recovered 64.5 million yuan (about $9.5 million) in fraudulent claims.

In a "typical case" described by Deyang officials, the director of a town veterinary station conspired with several farmers and relatives to falsely report pigs to the insurance company and collected insurance payouts on phantom pigs. According to a description of the case in a newspaper devoted to communist party discipline, the scheme began in 2015 when an insurance agent sought the veterinarian's help to expand insurance coverage. The insurance agent offered a guaranteed payout based on the number of pigs insured, regardless of how many actually died. The veterinarian recruited three farmers and a relative to sign up for insurance on thousands of pigs that didn't exist. The veterinary station official--who raised no pigs himself--collected thousands of yuan in false claims plus "management fees" from the farmers. In January 2019, the veterinarian was expelled from the communist party and removed from his job. He is now awaiting trial where he is assured of receiving "severe punishment," the legal newspaper said.

A separate article described a farmer's complaint that he had not received an insurance payout on pigs that died this spring. The farmer in Shandong Province reported that he had bought insurance on 220 pigs last year when an insurance company representative came to his village offering policies that cost only 6 yuan (less than US$ 90 cents) per pig, with the rest of the premium paid by government subsidies. In March, the farmer's pigs died and he contacted the company to file a claim. An insurance adjuster arrived promptly, counted, weighed, and photographed the dead pigs. The farmer soon received 7000 yuan directly deposited in his bank account.

The Shandong farmer's next batch of pigs also died, and he filed another claim. The insurance adjuster once again arrived and filed his report with the company, but no compensation arrived this time. The local newspaper reporter said he contacted the insurance company to ask about the farmer's case. The manager confirmed the event and claimed that the new batch of pigs was not covered because the insurance had expired. The manager claimed that the company had not refused to pay out the claim, but was still investigating the situation.

It is unclear why these articles were inserted in news media this month. Are ASF claims overwhelming insurance companies, or are increased claims revealing extensive fraud? Are farmers complaining about unpaid claims, or are officials trying to reassure farmers that government-subsidized insurance is a safety net for them? We can only guess, for now.

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