Economy, Business And Markets

3 Insurance Firms Fined for Cheating

3 Insurance Firms Fined for Cheating 3 Insurance Firms Fined for Cheating

Central Insurance of Iran–the industry’s regulator–has fined three insurance companies for failure to show 100% of their earnings in their financial statements in order to evade paying a share of their income for compulsory reinsurance and other taxes. 

Under the mandatory reinsurance regulations, all insurance companies operating in Iran are obliged to pay a percentage of their earnings from direct life and non-life business to the regulatory body. 

CII deputy for supervisory affairs, Habib Mirzaei, said that the three firms had skimmed 100 billion rials ($3.3 million), which should now be reimbursed to the CII reported on Wednesday. The amount of penalties was not clear. 

Mirzaei elaborated on a recent CII decree banning insurers from directly selling third-party vehicle policies to automakers.  “From the beginning of the fiscal year (March 20), insurance firms are not allowed to sign contracts with the automakers. They must sell third party vehicle policies directly to the owner of cars and without offering discounts.”

“Some insurers were illegally giving a portion of their premium to automakers and a part to the middlemen. Basically, incentives if nay should be offered to buyers not the carmakers.”

Automakers usually sell new cars with a free one-year third party policy included. Insurers usually sell such policies to the car companies at lower prices, hoping to make profit when the policies come up for extension a year later. 

However, automakers have failed to clear their dues to the insurers, making third party insurance a source of net loss. There have been constant reports that Iran Khodro, the top car manufacturer and assembler, owes insurance firms an estimated 7-8 trillion rials ($232-$265 million).

Addressing recent controversies over lowering some insurance companies’ technical reserves by the CII, Mirzaei said “insurance companies are allowed to use their technical reserves for claims related to natural disasters. They may also have access to the reserves with permission from the Supreme Insurance Council.” 

Four insurance companies have used their technical reserves to raise their capital, he said noting that Day Insurance Company, a subsidiary of Day Bank, was the last to do so. Day Insurance recently tripled its capital.