The Saudi Arabian Monetary Agency (SAMA) has decided to raise vehicle insurance premiums by 60 percent, a move that has angered car rental firms and individuals, according to insurance experts and dealers quoted in local media.
The total value of vehicle insurance premiums stood at SR 4.69 billion in 2012, accounting for 22 percent of the total premiums injected into the insurance sector, according to a local newspaper quoting a report by SAMA.
The report said total claims incurred by the vehicle insurance sector amounted to SR 3.22 billion, representing 78 percent of the total value of the premiums. Meanwhile, the retention rate of vehicle insurance stood at 94 percent, which is the highest in the entire insurance industry, the report said.
Insurance expert Murad Ziraiqat said SAMA made the decision to correct prices in the market to end the fierce “price war” between insurance companies.
He said earlier pricing in the market was not logical for vehicle insurance and should be based on the actuarial calculations made at the beginning of every year.
However, insurance firms ignored these policies creating enormous losses for these companies, he said.
Ziraiqat said the price correction ranged between 30 and 60 percent. He said there was no legislation governing the costing of premiums in the insurance industry.
“No law exists, just pricing policies based on technical matters related to the position of a company and its financial results,” he was quoted as saying.
He said the insurance industry in Saudi Arabia needs to mature so that it can contribute to the country's Gross Domestic Product (GDP) and create more jobs.
He said insurance companies have begun making profits but not realized the required stability that is hoped for over the next five years.
The deputy chairman of the car rentals committee at the Jeddah Chamber of Commerce and Industry (JCCI), Mohammed bin Hadi, called for strict price controls in the insurance industry.
He said SAMA and the traffic department intervened in the market because of the major losses incurred by individuals and car rental companies, and the fraud and manipulation by insurance firms.
Musab Al-Farhan, a citizen who had bad experiences with insurance companies, said there are no laws and regulations ensuring binding agreements between individuals and insurance firms.
Insurance premiums for cars go up by 60%
