The domestic travel insurance market may take off this fall thanks to the China National Tourism Administration's recent rule requiring travel operators to buy liability insurance from domestic insurers beginning on September 1.

Travel agencies that fail to purchase the policies will face "severe punishment," the administration said in a statement.

The insurance policies will cover travelers' financial losses due to death, illness, injury, accident, theft or damage through fire and other hazards.

The policies will provide coverage up to 2 million yuan (US$241,000) annually. It means individuals touring the Chinese mainland who suffer losses would receive 80,000 yuan in compensation. That amount doubles to 160,000 yuan for outbound travelers.

The move is designed to help domestic travel services pay legitimate travelers' claims and protect their legal interests, according to the administration, the national regulatory body of the travel industry.

"Insurance companies will pay compensation to the travelers instead of travel agencies," said Yang Fan, an official of Shanghai Tourism Administrative Management Committee, the local regulatory body of the tourism market. "Paying claims was a huge financial burden for travel agencies."

Industry officials said the new regulation will not only benefit domestic travel agencies but also the insurance industry.

Sun Hang, an official of East Shanghai International Travel Service, welcomed the administration's new stipulation.

"It will put us in a favorable position when travel-related compensation is called for," said Sun. "We will purchase the liability policies not only because of the administration's requirement, but also because we can save time and money by just letting the insurers do it."

For insurers, it is a golden opportunity to boost miniscule sales, said industry officials.

The People's Insurance Company of China was the first to launch travel liability policies in response to the new rule.

"After getting approval from the China Insurance Regulatory Commission in April, we unveiled the new insurance product and we're sure there will be some followers," said Xue Liugen, a spokesman at the Shanghai branch of People's Insurance, one of the nation's leading insurers.

However, officials of the insurance industry are less than optimistic about acceptance of the policies based on insignificant sales of existing travel-related policies even while there is a boom in travel.

"The sale of travel-related policies is always small," said Chelsee Yuan, an official with the Shanghai branch of American International Assurance Co. Ltd., the first foreign insurer on the Chinese mainland.

One reason travelers may shun travel-related insurance is because life insurers are not permitted to sell property insurance so the current travel policies do not cover damage or loss of property, said Yuan.

"The launch of the new stipulation is a win-win situation for both the travelers and the insurers anyway," Yuan said.

(Eastday.com.cn 06/26/2001)