SAMA denies insurance premium hike; experts say it’s unavoidable

The Saudi Arabian Monetary Agency (SAMA) has denied press reports that it had allowed insurance companies to raise their vehicle and medical premiums.
“These press reports are groundless and do not reflect the reality of SAMA’s directives,” said Ali Solaiman Al-Ayed, director general of the Insurance Company Control Department.
But Moussa Al-Rabian, an insurance expert, said a hike in premiums was essential for insurance companies to offset their losses.
He urged the Cooperative Health Insurance Council to intervene to tackle the issue of a rise in health service charges, adding that it was hurting insurance companies.
Ahmed Al-Raqeeba, a market analyst, said he expected companies to apply new premiums next year for car and medical insurance. “Some firms have already raised charges by 50 to 60 percent,” he pointed out.
Premiums for motor vehicle insurance were revised on April 1 following big losses on the part of insurance companies due to an increase in road accidents. Since then, motorists have suffered an almost two-fold increase in premiums. Premiums have increased from SR400 to SR700 and are expected to rise further.
Mandatory insurance for automobile and health has altered the general landscape of the insurance sector in the Kingdom. The motor insurance business in Saudi Arabia is one of the lucrative in the world, with an average growth of 14 percent per annum.
The total insurance premiums calculated on vehicles was SR4.69 billion in 2012, representing 22 percent of gross premiums in the insurance sector. Net claims incurred in the vehicle insurance sector amount to SR3.22 billion, representing a loss of 78 percent, while there is a 94-percent retention rate for vehicle insurance.
Yet the SAMA official said his organization had instructed insurance companies to comply with regulatory provisions, particularly those set forth under Article 46 of the Cooperative Insurance Companies Control Law.
The law stipulates that the pricing policy adopted by companies should be fair, reasonable and adequate.
A company should also provide SAMA with justifications and a basis for setting prices, Al-Ayed said. These prices shall not rely upon other company’s pricing methods, he explained.
Companies should apply premiums determined by the actuary and revised underwriting guide for all medical insurance products effective from Jan. 1, and all motor insurance products effective from April 1, Al-Ayed said.
Fahd Al-Anazi, an insurance expert, said that premiums should be fair and based on calculations of profit and loss. “No company is allowed to raise premiums because of an increase in insurance prices, but should be based on actuarial studies,” he said.
Saudi Arabia’s insurance market is estimated at more than SR25 billion.