The minister of economy has called for a competitive Iranian insurance sector saying a level playing field is the primary requirement for the enhancement of the insurance industry.
Noting that chronic inflation has been a major hurdle to a progressive and dynamic domestic insurance industry that has disallowed it from gaining a foothold among the ordinary people, Ali Tayyebnia said the "annual inflation rate would drop to the much-awaited single-digit" by the end of the current Iranian month (Dec. 21) .
Official data says inflation presently is hovering around 15%, down from the 40% registered when Hassan Rouhani took office in the summer of 2013.
The minister was speaking at the opening ceremony of the 8th International Insurance and Development Conference in Tehran on Saturday.
Investment and manufacturing go hand-in-hand, he noted, adding that since the two are risk-averse "insurance is instrumental in fostering economic growth."
According to the minister, inflation in the manufacturing sector is "already below 5% which should help the sector grow in different categories."
It is indeed "regrettable that we are far from a healthy and competitive insurance market that offers a broad range of diverse and quality services."
On the low prevalence of insurance coverage in Iran, he recalled that penetration rate of insurance in the country is 1.9 while the global average in 2014 was 6.2, Mehr News Agency reported.
Tayyebnia called for reforming the insurance sector's high tax rates, saying that "40% of insurers' revenues is spent on taxes."
The top economic official considered the regulatory performance of the Central Insurance of Iran as inadequate and said, "The regulating body has ignored its role as the industry's watchdog and has instead taken on a meddlesome role" in the sector.
"CII supervision should focus on insurers' capital adequacy rather than regulating prices in order to enable and empower them in meeting their obligation."
He said the insurance industry has the potential to finance other sectors as they collect a considerable amount of 'technical reserves' between the period they receive premiums and indemnifying claims.
Tayyebnia referred to life insurance as a key industry across continents. "Life insurance has the poorest performance in the Iranian market due to a variety of economic and social factors which have not been properly identified and addressed."
The life insurance penetration rate is 3.4% in the world, while in Iran it is a meager 0.2%," he noted.
Reiterating calls for structural reforms to lift the lethargic insurance industry, the minister said change must encompass private and public-sector firms plus the regulatory body to be able to develop a reliable and comprehensive market with enough incentives.
The Iran Insurance Company ‒ a behemoth in its own right and only government-controlled insurance company ‒ should not dominate the market but rather complement it, he told the conferees.
"Iran Insurance Company should focus on categories that are not appealing to private insurers."
Unattractive Still
Head of Central Insurance of Iran said foreign insurers should develop methods to offer services through Iranian firms.
"Iran's insurance industry needs knowledge and technology more than ever," Mohammad Ibrahim Amin said.
He considered the insurance companies' low capital levels a key challenge that he blamed on low profitability.
'The government has set a minimum capital adequacy for insurance companies but investors still do not show interest."
He suggested further curbs on the capital adequacy ratio for insurers to make the sector more palatable to private enterprise.
"Insurers should be allowed to set insurance rates in a way that they can recoup claims…But for now they have to compete in offering cheaper policies," he said.
Turning a blind eye to the price war among insurers would only exacerbate the condition," he warned.
Lack of a rating system in the domestic insurance market is another curtailment according to the CII chief.
Curbing Gov't Intervention
Mohammad Nahavandian, President Hassan Rouhani's chief of staff, called for promoting competition in the management of the insurance industry which he said is "almost a monopoly."
Insurers should "not rely on government resources as in the long term it would put their capital adequacy at risk," he said, adding, "Government intervention has always been harmful for the economy."
Supporting and sustaining private enterprise should be the government's first priority but "one or two government entities are necessary for fostering competition in the market," the senior aide to the president was quoted as saying.
