Insurance Authority to Regulate Corporate Governance

The Supreme Council of Insurance Industry will soon start reviewing the rules for implementing corporate governance in insurance firms, the head of the council and president of Central Insurance of Iran said.

“We will keep watching insurance firms’ financial capability. We will also keep trying to help insurers boost their capital adequacy so that they could accept higher risks,” IRNA also quoted Abdolnasser Hemmati as saying on Sunday during a meeting with chief executives of the insurance industry.

By promoting corporate governance, CII is trying to create the conditions in which CEOs can independently make informed choices and decisions.

Compelling insurers to uphold the rules of transparency, management structure, auditing and risk management is on the agenda of the insurance regulator.  The presence of independent non-executive members on the insurance companies’ boards is also among CII’s plans for addressing corporate governance.

 Warning Against Malpractice  

Hemmati also warned insurance firms to stop underselling insurance policies, which he compared to a “race toward bankruptcy”.

Underselling insurance policies, especially in motor insurance category, has been challenging the industry in recent years, even though regulations ban offering extra discounts on auto policies.

“The CII would impose restrictions on insurance firms, if it feels they are not capable of meeting their commitments to policyholders,” he said.

Last month, the CII had warned insurers against unhealthy operations, saying that it would start setting minimum premium rates if insurers keep undercutting each other.

Hemmati also asked insurance CEOs to be cautious about their performance in offering supplemental health insurance coverage.

“Premiums in this category are much lower than paid losses,” he said.

According to CII data, personal auto policy solely accounted for 41.5% of insurers’ generated premiums during the five-month period ending on August 21. Health category had a 20.4% share in insurers’ earned premiums.

During this period, the loss ratio stood at 168.5% for health category and 70.9% for PAP category.