People's Insurance of China and China Life Insurance, two of the country's largest insurers, have been found to be involved in "improper and illegal activities" mounting to around 3 billion yuan.
The audit authority found illegal sales of insurance policies, improper claim settlements and unlawful overseas investment.
The auditor said it had inspected the insurers' 2009 books from May to July last year, and that the inspection led to at least 350 people receiving unspecified punishments.
