JEDDAH, 30 December 2002 — A price war has started between insurance companies since traffic police began to honor driving license insurance policies issued by all companies.
In order to attract customers, many insurance companies in the Eastern Province are offering an SR20 discount on the actual insurance fee of SR340, Okaz newspaper reported yesterday.
The customer stands to benefit from the price war. The less the cost the more the demand for license insurance. The number of insured licenses in the Kingdom is low compared to the seven million holders of driving licenses.
Market observers predict that the price war will last a year and will peter off only when insurance companies start losing money by the end of the year. They also forecast that these companies will eventually agree on a uniform fee.
The number of car accidents has risen dramatically in the past few weeks, with 200 to 300 road mishaps reported daily. More than 80 insurance companies are receiving, on an average, three to four accident claims every day since license insurance was enforced last month.
Accident claims are on the rise because more and more people are taking out insurance, unlike before when there were few takers for policies.
Insurance companies have sought the cooperation of local police to ensure that the compensation claim is realistic. Some of the accident claims, they say, are exaggerated. Consequently, insurance firms tend to seek the opinions of more than three car mechanics instead of one to get a clear estimate of damage.
The traffic police are reportedly planning to fine those without license insurance from next month. Such penalties will indirectly benefit insurance companies because more and more people will take out insurance at least to avoid paying fines. An insurance company spokesman said motorists would stand to benefit if there were more insurance players than a single monopoly company. More players means more competition which will ultimately benefit the public in terms of price, he added.
When license insurance was made mandatory from Nov.20 the National Company for Cooperative Insurance alone was issuing such policies.
