Central Insurance company of Iran has proposed amending the third-party auto insurance law to remove the ceiling on claims by owners of expensive cars.
“The insurance industry believes that there should be no difference between low-cost and expensive cars. We have sent a proposal to parliament to remove the cap,” Gholamreza Soleimani, the CII president was quoted as saying by ILNA.
As per law, insurers are obliged to compensate up to 2.2 billion rials of loss incurred during mishaps to expensive cars – those costing 2.2 billion rials and above in the current fiscal year that ends next March.
The law is seen as a major hurdle after the historic rise in car prices in the Iran in the past several months. Insurers should compensate all the losses, he implied, expressing guarded optimism that the lawmakers would respond in the affirmative.
Third-party vehicle insurance is mandatory in Iran and car owners lacking this type of policy are fined.
It is essentially a form of liability insurance according to which, in the case of road accident, the insurer is required to compensate the inflicted party for the physical or financial loss according to the reimbursement ceiling set by the High Council of Insurance, affiliated to the Central Insurance of Iran.
An insurance policy is bought by the insured (first-party), from an insurer (second party) for protection against claims by another (third party).
Almost one-third of insurance revenue comes from the mandatory auto insurance category. Generating 204 trillion rials ($1.3 billion), this segment recorded annual growth of 39.7% in the previous fiscal year (March 2019-20) as households generally own one or more cars.
Insurers paid 33.2 trillion rials in claims so far this year, which was 18.18% higher compared to the year before. Personal auto insurance tops the list of insurance categories in terms of the share of total claims, alone accounting for 40% of payouts.
Experts say the law needs revision along with a more risk-based supervisory system. On the one hand, this would imply liberalization of regulation and on the other force the market to move toward a more value- and risk-based management, where transparency contributes to market discipline and an efficient insurance market.
