JEDDAH, 16 January 2007 — Saudi Arabia yesterday decided to change driving license insurance into vehicle insurance and authorized all licensed insurance companies in the country to provide the new mandatory third-party vehicle insurance service.
The existing license insurance will be valid until its expiry date. The Council of Ministers, chaired by Crown Prince Sultan, took the important decision, which is expected to further boost the Kingdom’s insurance market. It also follows the licensing of 13 new insurance companies, opening up the market.
“The companies that are licensed to extend cooperative insurance services in the Kingdom will be allowed to provide vehicle insurance as long as they have the capability to provide the service and meet car insurance requirements,” the Saudi Press Agency said quoting the Cabinet decision.
“Third party cooperative insurance on the vehicles of individuals, companies and establishments has been made mandatory without any exception,” SPA reported, quoting the amended law.
Saudi Arabia introduced third-party insurance on driving licenses for the first time in October 2001.
Analysts welcomed the Cabinet decision and said it would strengthen the Kingdom’s insurance market, which is expected to be worth SR30 billion within a couple of years.
“This is a good decision as it not only protects vehicle users but also meets international standards,” Dr. Abdul Ilah Saati, professor of insurance at King Abdulaziz University, and a member of the International Insurance Association, told Arab News.
“Vehicle insurance is a standard system followed all over the world. It prevents fraudulent practices. The introduction of the new system is important after the opening up of the market to international insurance companies,” Saati said and urged authorities to license more insurance companies in order to increase competition and improve service at reasonable price.
Abdul Kareem Sait, business development manager at Arabian American Insurance in Alkhobar, said the new decision would reduce malpractices in the market. “It will also reduce the number of people jailed for causing road accidents as the insurance company will pay compensation in order to win their release. So people can drive their vehicles without any fear,” he added.
A premium of SR350 to SR400, depending on the engine capacity, is charged for third party insurance. Those opting for comprehensive insurance should pay three to 3.5 percent of the insured car value.
The National Company for Cooperative Insurance the Kingdom’s first licensed insurance company, has already launched a vehicle liability insurance called Sanad which provides a maximum third party cover of legal liabilities up to SR10 million. It is offered for an annual premium of SR375 for private cars.
