Arguments for and against full compensation

Arguments in favour

  1. The travelling public are not in a position to judge the financial position of individual licensed travel agents since they do not have access to such information. The tour price they pay should only reflect the quality of service they are expected to get and should have no bearing on the financial position of travel agents. Therefore they should not be required to bear the loss in the choice of travel agents.
  2. In addition to the tour fares, outbound travellers may suffer loss in respect of visa fees and airport tax. Taking into account the loss of such fees and holidays, and the inconvenience caused to travellers by the collapse of travel agents, the travelling public should be entitled to a full compensation of the tour fares.
  3. The tour fares are pre-paid by outbound travellers and the money belongs to them and it is only logical for them to be granted a compensation of 100%.
  4. Taking account of the healthy state of TICF (a balance of $222 million as at 15 October 1996), it should still have adequate reserve to meet the potential liabilities even with an increase in the rate of compensation.

Arguments Against

  1. At a rate of compensation below 100%, there is still incentive for travellers to exercise care in the choice of travel agents. If the rate is set at 100%, such an incentive will disappear and the travelling public will be less prudent in choosing travel agents and would more likely than not go for those offering the lowest prices regardless of their managerial competence or goodwill. Probably, this may then lead to cut-throat competition among travel agents and collapse of smaller agents. In the long run, this may result in the domination of the market by a few big players and hence reduce competition and consumer choice in the market.
  2. It should be an exception rather than a norm for Government to intervene in normal business transactions. Every individual, whether businessman or consumer, should normally bear the risks or consequences of his/her choice and decision. In the case of outbound travel industry, a statutory compensation fund was set up having regard to the impact of default of travel agents on the travelling public and the need to protect the outbound travellers. A rate of compensation at 100% (i.e. full compensation) will be inconsistent with the established economic principle.
  3. Ordinary creditors of bankrupt companies, e.g. banks, estate agents, retailers etc., seldom, if ever, manage to obtain full redress. In the context of insurance policies, premium paying insurers have to accept "no-claim" portions.

Last Updated on 21 August 1998