Last week, an aniline spill into drinking water in Changzhi, Shanxi Province, sparked controversy after local authorities were accused of dragging their heels when it came to reporting and dealing with the incident. But, with investigations into official conduct and clean-up work still going on, many who have been concerned about the issue of compensation will be relieved to learn that the plant from which the toxic chemicals escaped is covered by environmental pollution liability insurance.

Liability insurance plays a positive role in safeguarding the public and improving enterprises' risk control. In developed countries, liability insurance accounts for 20 to 40 percent of property and casualty insurance sales and has become an important tool for lowering risks for society at large. Yet, in China, liability insurance accounts for only some 3 percent of the local market. And despite some local governments' efforts to promote liability insurance, the sector has expanded little.

To develop the liability insurance market, the government should set up rules requiring enterprises to buy compulsory liability insurance, just as Western authorities do. Meanwhile, strict supervision should be conducted on the domestic insurance sector, which remains characterized by low service quality, outdated management, high rates and limited liability.

The author is Qu Zhehan, a media personality.