Insurers resist airport monopoly plan
By Zhang Dingmin (China Daily)
Updated: 2004-03-17 10:31

Strong resistance from local insurance firms seems to have worked in at least delaying an aggressive attempt by a Sino-foreign insurer to monopolize the flight accident market at the Beijing Capital International Airport.

But it remains unclear how regulators will solve the dispute, which will have a symbolic significance for the development of foreign insurance companies in one of the world's fastest-growing markets.

An official with the legal department of the China Insurance Regulatory Commission (CIRC), the market watchdog, declined to comment on the legitimacy of the controversial plan, citing the sensitivity of the issue.

And the commission's Beijing Bureau, which is responsible for overseeing the local market, said it is still "studying the matter."

Experts are more open about the issue.

"I think it's a very bad idea because it has a monopolist nature, and it does no good to the development of the Chinese insurance industry," said Wang Xujin, director of the insurance department of the Beijing Technology and Business University.

Earlier this month, Sino-US MetLife Insurance Co, a 50-50 joint venture between US insurer Metropolitan Life Insurance Company and the Capital Airport Group, submitted a letter to the local flight accident insurers' association, notifying the 19 member companies that it would soon become the sole insurer selling flight accident policies at the Beijing Capital International Airport.

The airport also said it planned to stop selling existing policies as of Monday. The move triggered widespread anger among local insurers.

"They are trying to monopolize the market, which will absolutely infuriate all the members," said a manager at one of the 19 local insurers.

The capital airport is one of China's busiest airports. Passengers, most of whom routinely buy the 20-yuan (US$2.40) accident insurance policy, totalled 24.4 million last year, despite a 10 per cent decline due to the outbreak of SARS (severe acute respiratory syndrome).

MetLife issued a statement on Monday, saying it has postponed the plan to sell policies at the airport, but said all possibilities are open as negotiations with related parties continued.

Analysts said a monopoly is unwelcome in China's burgeoning insurance industry, as it tends to lead to deteriorating services and push up premium rates.

"And it's not good for consumers as they will have less choice," Wang said.

Monopolizing flight accident insurance, which is highly risky as claims can be enormous, also requires very effective protection from reinsurance arrangements, he added.

The legitimacy of MetLife's planned move remains pivotal, but some experts said they have yet to sift through more legal documents to make a conclusion.

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