The parliament is working on legislation that will cap payouts in third-party auto insurance coverage for luxury cars.
“Owners of luxury cars should buy auto body insurance [to be able] to compensate for losses higher than the proposed cap…The measure is to support lower income policyholders who cannot afford huge payouts,” Ali Khezarian, MP, was quoted as saying by IMNA.
As per law, insurance companies should pay up to 3.2 billion rials in losses incurred during mishaps to expensive cars – those costing 3.2 billion rials and above in the next fiscal year that begins on March 21. The remaining costs must be paid by the policyholders.
This is while the cap on insurance cover is seen as a major hurdle after the unprecedented rise in car prices in Iran since 2020.
Last year, the Central Insurance company of Iran proposed amending the third-party auto insurance law to remove the ceiling on claims by owners of expensive cars.
Third-party vehicle insurance is mandatory in Iran and car owners lacking this type of policy are penalized.
This type of insurance essentially is a form of liability insurance according to which, in the case of a road mishap, the insurer compensates the inflicted party for the physical or financial loss according to the reimbursement ceiling set by the High Council of Insurance, affiliated to the CII.
An insurance policy is bought by the insured (first-party), from an insurer (second party) for protection against claims by another (third party).
Third-party auto policies accounted for the largest share of the premium with nearly one-third (34.8%) of the total income during eleven months to February 19. Premiums from third-party auto policies reached 350 trillion rials ($1.34 billion), up 46.7% on the same period last year.
Third party auto payouts accounted for 32.4% of the total payout. Nearly 175.1 trillion rials ($673m) was paid in compensation in this category.
Experts say insurance should be reformed 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 competitiveness.
