Economy, Business And Markets

3% Growth in Life Insurance

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3% Growth in Life Insurance
3% Growth in Life Insurance

Life insurance accounted for 14.8% of industry’s premiums generated during the first quarter of the current fiscal year (started March 20), marking a growth of 2.9% compared with the same period of last year.

Data derived from SANHAB system, an industry-wide online database, show that during the period, insurers generated 7.7 trillion rials ($250 million) by selling more than 776,000 life insurance policies.

The surge in the share of life insurance category in insurers’ portfolio seems to be the result of successive cuts in banks’ deposit rates. While lenders were paying approximately 15% interest on one-year deposits during the period, insurers were offering 18% interest on five-year term life policies.

However, the recent ruling by the Supreme Council of Insurance Industry to lower the maximum rate of return to 16% for two-year term life insurance is expected to hit insurers’ revenues from the category in the coming months.

Based on the ruling by the council early this month, insurers will have to offer approximately 16% returns on two-year term life insurance policy (cash-value life insurance). The rate for four-year term policies is also set at 16% for the first two years and 13% for the rest of the period, while for periods exceeding four years, insurers are allowed to offer only 10% returns. The ruling will come into effect from August 20.

Iran Insurance Company, the state-owned behemoth, Pasargad Insurance Company–affiliated with Bank Pasargad Iran– and Karafarin Insurance–affiliated with Karafarin Bank– recorded highest shares of life category in their portfolio during the first quarter of the fiscal year.

 Reign of PAP

Personal Auto Policies still account for the largest portion of insurers’ earnings, as 45% of total generated premiums in the period came from PAPs. The category accounted for 41% of insurers’ earnings during the same period of last year.  

PAP category’s Q1 loss ratio stood at 50.69%, while the industry’s total loss ratio was recorded at 62.5%

The loss ratio stood at 176.5% in health insurance categories. Premiums generated in the health category stood at 6.9 trillion rials ($220 million) by June 20, while insurance firms paid a total compensation of 12.2 trillion rials ($393.3 million) for health policies.

 IIC’s Market Share

Iran Insurance Company accounted for 32% of the total earned premiums during the period. Asia Insurance, a leading private firm, and Parsian Insurance, affiliated with the privately-owned Bank Parsian, accounted for 11.25% and 7.25% of the earned premiums, respectively.

IIC had control over half the market last year, causing fears of monopoly and unfair competition among the industry activists.  

The government and the Central Insurance of Iran have announced plans     to alter the role of IIC in the market.

Abdolnasser Hemmati, CII’s president, said CII, as the only state-owned entity, should play a key role in promoting discipline and innovation in the insurance market.

“IIC can enlarge the industry by offering innovative policies and promoting the rule of law in the market, especially in automobile and health insurance categories,” Hemmati said on Saturday.

These measures are expected to open the field wider for private insurance players and give an overall boost to the insurance industry.