But the rules will have little affect on the entire market, which is dominated by several large life insurance players, experts suggest.

Three major life insurers, China Life, China Pacific Insurance Co and Ping An Insurance, which control most of the aviation passenger accident insurance market developed the rules.

The new rules will take effect in March, after regulators approve the final revision.

The policy now in place was designed by the China Insurance Regulatory Commission (CIRC), which regulates China's insurance industry.

The rules, applied equally to all market players, will help reduce the likelihood of price wars.

"It is a sign market-oriented reform is going on, which will lead to a more open and fair climate for all players, said Wang Xujin, director of Beijing Technology and Business University's insurance department.

In addition to providing more returns to customers, the new rules are designed to streamline the promising market.

Firms are also making huge profits on the backs of consumers.

As with the current policy, the new rules will allow insurance firms to provide across-the-board services.

Under the new rules, passengers who purchase aviation insurance will have coverage from the time they board their planes to the time they disembark at their final destinations.

The new rules will allow claimants to receive a maximum 400,000 yuan (US$48,310) in compensation, double the allowable claim under the current policy.

Customers under the new rules will be limited to buying up to five policies. The rules also impose a 2-million-yuan (US$241,540) ceiling on the combined payouts.

The current policy does not impose such limits.

To ward off ill-fated competition, domestic insurers are currently allowed to form a joint partnership to sell aviation passenger accident insurance products.

Insurers are offering their services in Shanghai's airports. The insurance market in Shanghai, China's financial hub, is believed to be more developed compared with other regions of the country.

"Another encouraging development is more players will be able to tap the market, said Wang, referring to the fact property insurers will be allowed to develop the business.

The newly revised Insurance Law allows non-life insurers to develop short-term life insurance services, opening another opportunity for them to expand their businesses.

Introduction of more players in the market will further boost the hot competition, Wang said. But technical issues will impede that process.

The problems mainly include product design and marketing access.

Unlike life insurers, property insurers do not have sales agents and extensive distribution networks, which are considered efficient tools needed to extend their services.

"It is a clear fact the top regulators also encourage product innovation and free, but healthy, competition in the market, said Wang Junqi, deputy manager of Manulife-Sinochem Life Insurance Co, China's first Sino-foreign joint venture life insurer.

The joint venture was founded in 1996.

The company now offers aviation insurance policies in both Shanghai and Guangzhou. However, products sold in the airports are still negligible, accounting for 1-2 per cent of the firm's policies.

"We do not focus all of our attention on the products offered at the airports, Wang Junqi told Business Weekly.

The Shanghai-based company has launched numerous new products to offer comprehensive travel insurance plans to customers.

"Anxing and "Wuyou, two of the firm's newly launched products, ensure policyholders will receive comprehensive coverage regardless of how they travel.

These policies provide extensive coverage at competitive prices.

"It is much more convenient for customers to buy these policies rather than the policies offered at the airports, Wang said.

More products are being developed.

"We also believe efficient services brought by well-trained sales teams will ensure customers receive more value-added services, Wang said.

(Business Weekly January 28, 2003)