Flight-delay insurance has slow takeoff

SHANGHAI - Spending 20 yuan (S$4.14) on flight-delay insurance sounds a good deal for passengers leaving from Chinese airports, which have poor punctuality records, but it is rare that anyone actually buys it.

Yang Hao is one of the few who does, and he said he recently received 1,000 yuan in compensation after claiming for a delayed flight.

"For people like me who take planes every week, flight-delay insurance is worthwhile," he said. "At least your waiting time at the airport can be compensated for."

However, most travelers are not tempted to buy insurance policies.

"I don't believe in that kind of insurance," said Zhou Jing, another frequent flyer. "To my knowledge, situations such as flight flow control and extreme weather conditions are not covered, and even if you qualify, the application procedure for getting compensation is long and frustrating."

Zhou has a point. Most flight delay insurance only applies if the flight is delayed for more than four hours, and compensation is often between 200 and 400 yuan.

"The insurance is just for profit," said Li Lei, an industrial analyst with Minzu Securities. "In China, considering the high rate of delayed flights and passengers' low motivation to buy it, I don't see much business opportunity there."

China CITIC Bank's credit card division launched the nation's first flight-delay insurance service in May 2006, but there are still only a few insurance companies offering coverage today.

"Compared with traditional products, companies can hardly make a profit from delay insurance," said an industry insider who spoke on condition of anonymity.

Zhang Wu'an, spokesman for Spring Airlines, China's only budget carrier, said sales of its flight insurance increased slightly this summer.

"Between 10 and 15 per cent of our tickets are sold along with insurance," he said, explaining that passengers who purchase the insurance automatically receive a text message if their flight is cancelled or delayed by more than three hours, and the compensation goes directly into passengers' bank accounts.

Analyst Li said flight insurance sounds more like a marketing tactic for the low-cost carrier.

"The compensation will cost less than the cost of advertising, but will help its sales more effectively than pure advertisements," he said.