A senior official has listed the challenges facing Iran’s insurance industry while discussing its prospects.
In an interview with Financial Tribune’s sister publication, Tejarat-e-Farda, Mohammad Ebrahim Amin, head of the Central Insurance of Iran, said the insurance industry’s meager role in domestic economy is shown by its share of GDP, which was 2% in Iran in 2015.
Amin noted that the international figure stands at 7%, which shows the big gap between insurance industry’s role in advanced economies and in Iran.
“In an advanced country, life and health premiums account for about 70% of the total share of the industry. In Iran, life and health insurance account for less than 40% of the insurance industry,” he said.
In the international business arena, insurance companies play a vital role in fending off risk and guaranteeing profitable ventures for firms and manufacturers. However, this key sector is relatively underdeveloped in Iran.
Amin pointed to the universal health insurance provided by the Iranian government, saying it leaves little room for private insurance companies to enter the race.
“The only opportunity for private insurers in the health sector is to provide supplementary services, which has not been embraced by people to an acceptable extent,” he added.
Pointing to the unofficial money market and the unauthorized credit institutions active in this market, Amin says people are less willing to buy life insurance because the interest rate offered for life insurance is 18% while uncertified lenders offer higher deposit rates.
Penetration Rate
According to Amin, the low figure of insurance’s penetration rate in Iran is another key issue. He blames inflation, recession, official and unofficial activities in the money market and an extensive but far-from-satisfactory social welfare system for the poor level of insurance penetration rate in Iran.
The CII chief also mentions a number of laws and regulations for the weak performance of insurance firms. He believes the government should not regulate premiums for private firms and insurers should not be taxed heavily.
“Unfortunately heavy taxes are levied on insurance companies and this has weakened insurance industry’s capabilities and potentials,” he said.
Asked about his organization’s role in Iran’s insurance industry, Amin states that exercising professional and legal supervision, which is his organization’s task, can settle some of the woes of the insurance industry but the organization cannot provide “a panacea” for all the evils visiting the insurance industry in Iran.
“Financial supervision is the most important part of the Central Insurance of Iran’s supervisory task. Monitoring the premiums and the amount of compensation paid to the customers is a key issue here,” he said.
Amin highlights the task of vetting top players in insurance companies as another key work of his organization, stressing that it is the key challenge for his organization and the domestic insurance industry in general.
“Lack of innovation, lack of sufficient resources, lack of expertise, lack of new services, lack of good marketing, lack of proper training for personnel and lack of consistency in insurers’ policies ” are the most serious woes needing attention, he said.
Amin noted that his organization has devised many plans for the coming year (beginning March 20).
“Rating the domestic insurance companies” is one of the top priorities of the Central Insurance of Iran in the coming year, he added.
“Reforming balance sheets, improving management, fostering creativity and innovation and expanding relations with foreign insurers” are of utmost importance and priority for the Central Insurance of Iran in the coming year.
International Ties
Stating that an overhaul of management strategies in the domestic insurance sector is needed, Amin stressed the importance of receiving international training from well-known international insurers for Iran’s insurance experts.
There were news in late January that global insurance firms are courting Tehran for business opportunities following the lifting of the sanctions and the first test of their intent will come in March when some Iranian companies seek new cover.
According to Reuters, reinsurers that share their risk and brokers that forge deals are exploring ways to tap a market worth $7.4 billion in premiums after a nuclear accord between six world powers and Tehran led to the removal of restrictions on financial dealings with Iran.
Insurance and reinsurance specialists regard the marine and energy sectors as among those offering the best opportunities in oil-producing Iran.
Alongside commercial cover, life insurance is a potential growth area as it represents less than a tenth of overall Iranian premiums, compared with more than half globally.
At first international companies are likely to link up with Iranian firms to capitalize on their local knowledge and to reinsure local insurance in the international market, with brokers helping foreign firms get that business, according to industry experts.
