The Central Insurance company of Iran has banned seven companies from selling third-party auto insurance policies because of their failure to meet CII's deadline for cutting ties with unauthorized applications.
According to a report carried by Risknews, the CII stopped assigning special ID codes to policies sold by the penalized companies from Wednesday evening.
The CII had warned insurance companies and agents against offering services to unauthorized applications and websites. "As of June 22 insurers who fail to meet the new regulations will be penalized as per law, which allows the regulator to bar CEOs of noncomplying companies and suspend their operation in certain categories."
The report did not mention the names of the banned companies. No insurance firm had responded to the CII move until Saturday. It needs mention that the share of third-party auto insurance in insurers' portfolio in Iran is simply too big to be avoided.
Iranian insurance companies generated 817.3 trillion rials ($3.4 billion) in premium income in the last fiscal year (March 2020-21). Third-party vehicle insurance topped the list generating one-third of the total income. Insurance companies sold 24.7 million third-party auto insurance policies last year worth 274 trillion rials ($1.15b) – up 33.5% and 36% in premium income and the total policies sold.
Following the CII announcement, Iran Insurance Company, Dana Insurance, Asia Insurance and Parsian Insurance announced that they had stopped working with unauthorized applications and websites.
The High Council of Insurance earlier mandated companies to acquire official permits from the CII for selling insurance policies online. The council announced a framework for regulating the activities of online insurance agents according to which an “Official Online Broker License" allows them to function on behalf of insurance companies, offer price comparisons and make online billings.
In recent years hundreds of startups and knowledge-based companies have opened in Iran with some offering insurance services and accounting for 96% of the total online sales. They are recognized as knowledge-based firms by the government and have attracted more than 5 trillion rials in investment.
Insurers can offer up to 2.5% discount but policies are being sold at considerably lower prices in some of the applications and websites.
Underselling third-party auto policies, which in Iran provides coverage for damage or injury to third parties, had recently disrupted the insurance market prompting objections by firms unable or unwilling to keep up with the competition.
CEOs of major but unauthorized insurance applications, namely Asan Pardakht, Bimeh Bazar, Bimito and AzKi, in a letter to the regulator recalled their concerted efforts to function in line with rules and urged it to reverse its instruction to insurers not to deal with unlicensed firms.
They said that they were among the first applications that applied for receiving online brokerage license from the CII. Unlike companies affiliated to insurance firms, their request for permits had been denied.
The CEOs called on the CII to revoke its decision in light of the support the regulator has given in recent years to promoting deregulation. Authorized online brokers, understandably, have welcomed the CII decision to restrict unlicensed websites.
