Saman Insurance Company, affiliated to Saman Bank, has become the first domestic company to offer ‘pay as you drive’ auto body insurance cost.
According to a press release seen on the company's website, the insurance premium will be subject to distance driven and unlike the traditional auto insurance system wherein car owners pay an annual fee.
Ahmad Zarabieh, the company CEO, said the aim is to inculcate a degree of fairness in insurance services. "It is vital to take policyholders' risks into account while calculating the premium rates. Risk factors should have a maximum impact on the premium."
The simplest form of usage-based insurance is built on the distance driven. However, the general concept of pay as you drive includes any scheme where the insurance cost may depend not just on how much you drive but how, where, and when one drives.
Saman's telematics pay as you drive coverage is offered in 5,000-kilometers, 8,000km and 12,000km packages, which can and should reduce costs to a third of what motorists pay now.
Zarabieh expressed the hope for a quick shift in the insurers' vision and expansion of data-driven insurance services in the country.
Back in 2017, Saman and Munich Re said they were developing a new model for auto insurance policies, in which the drivers’ behavior would be the criteria for calculating the premium.
“We have permission from the Central Insurance company of Iran for the new system for auto insurance. Mileage and geographical location where the vehicle is mostly used would be among the criterion for calculating the premium,” Zarrabieh said then.
According to Statista, the global vehicle telematics market has almost doubled between 2018 and 2014, and will be worth an estimated US$103 billion by 2022.
A report from IHS Automotive predicted that by 2023, 142 million people worldwide would have subscribed to usage-based auto insurance compared to the estimated 12 million today.
The CII, the supervisory body of the sector, has been struggling to implement the long-awaited change in auto insurance, from the present vehicle-based to driver-based coverage.
Experts say the present law needs reform along with a more risk-based supervisory system. On the one hand, this would imply liberalization, and on the other compel the market to move toward a more value- and risk- based management, where transparency can discipline the key market and direct it toward sustainable growth.
In 2017 the CII announced new vehicle insurance regulations through which the drivers’ behavior will have a direct bearing on the mandatory car insurance rates.
However, the plan has been on hold due to insurers' lack of access to Traffic Police's data on drivers' behavior and relevant information.
