Aviation Passenger Accident Insurance (APAI) in China originated in the Interim Provisions on the Compensation for the Personal Injury of Domestic Aviation Transport Passengers in 1998. In reviewing the supervision and management of APAI by the China Insurance Regulatory Commission (CIRC), we may divide the history into three stages.
During the first stage (1998-2002), APAI applied uniform provisions issued by the People’s Bank of China. At this time the CIRC was required to focus on organizing spot inspections and the strengthening of punishments concerning the violation of laws and regulations effecting control and regulation of APAI market order. The focus was a product of troubling issues, such as: the compulsive sale of APAI with tickets or other relevant insurance; counterfeit policies; and the embezzlement of premiums by agents or staff of insurance companies.
The second stage was from 2003 to 2006, during which the CIRC issued several specific notices on the reformation of APAI. The notices required insurance companies to issue their polices by computer, establish system networks, and separately perform accounting practices. Meanwhile, the CIRC timely issued new APAI guiding clauses for the reference of insurance companies. The clauses differed from the former clauses as they were not deemed compulsory.
Upon the issue of the Notice of Issues Concerning Strengthening the Management of APAI (hereafter referred to as “Notice”) by the CIRC in 2007, the guiding clauses of APAI were abolished. Abolishing the clauses suggested the coming of the third stage of the CIRC’s administration of APAI. Although the previous uniform provisions and guiding clauses brought positive effects for the steadiness of the APAI market, expectations were not met as it limited the independent business operation and the creativity of insurance companies. Additionally, the extremely low probability of an APAI accident encouraged negligent views of catastrophic hazards resulting in the impairment of insured parties benefits. Dealing with the above mentioned issues, the newly issued Notice made the adjustments below.
First, returning the right of APAI product development and pricing to insurance companies, allowing the adjusting function of the market system to be exerted adequately.
Secondly, requiring insurance companies to establish inner networks, issue policies by computer and perform real-time management. This ensures clients’ information is completely and timely recorded.
Third, requiring insurance companies to arrange reinsurance for their APAI.
Finally, encouraging insurance companies to develop and enrich their APAI and relevant products, to satisfy societal needs.
With the enforcement of the latest regulation, each insurance company actively creates and provides integrative vehicle accident insurance with a more extensive scope of protection and lower prices. New products provide consumers additional choice and help perfect a number of inherent defects in traditional APAI products, including the narrow protection scope and short duration.