Insurance Penetration Rate Rising

EghtesadOnline: Insurance penetration in Iran has been rising steadily over the past years, according to the head of the Insurance Research Center, affiliated to the Central Insurance company of Iran.

News ID: ۷۴۹۰۷۱

01 December 2019

“Performance of the insurance industry in the past decade shows that the annual insurance penetration rate has increased on steady pace,” Hamid Kordbache told a press conference Saturday.

Rising from 1.1% in 2011, the penetration rate reached 2.38% at the end of the last fiscal year in March 2019, IRNA reported.

Insurance penetration rate is measured as the ratio of premiums underwritten in a particular year to the GDP, according to Financial Tribune.

Despite the improvement, Iran is still far behind the global average of 6%, Kordbache said, recalling that the country has so far been unable to meet the goals enshrined in the Sixth Five-Year Economic Development Plan (2017-22).

The long-term plan stipulates that the insurance industry should reach a penetration rate of 7% by 2020.

With the current trend, he said, achieving 7% target will take at least 15 years.

The senior insurance official touched briefly on the lethargic performance of life insurance sector, saying it accounts for 14.5% of the total insurance portfolio, while the global average is higher at 52%.

Tough Enterprise

“Apart from covering risks, life insurance functions as an investment instrument,” Kordbache said, noting that reaching the global average is difficult under the present tough economic conditions.

Iran was placed 57th in the world in 2016 in terms of insurance penetration and 4th in the region.

With regard to life insurance, Iran ranked 5th   in the region that year (repeating the record for 5 consecutive years) and 52nd in the world.

As per CII data, the body in charge of supervising the industry, Iranian insurers generated 454.4 trillion rials ($10.8 billion) in premium during the year, up 33.5% compared to a year ago.

Insurers sold 61.3 million policies last year, up 4.5% compared to the previous year's 58.6 million.

The industry's total payouts amounted to 288.6 trillion rials, 32% higher than the 218.2 trillion rials paid the year before. The total number of claims, however, decreased by 3.1%, to reach 57.4 million.

As in previous years, third party auto insurance and medical insurance had the largest share in the industry's total premiums, 32.3% and 26.2%, respectively.

Medical insurance payout ratio was 151% during the last fiscal year. Third party auto category also recorded a payout ratio of 113.9%.

CII data indicates 16.5% growth in third party auto insurance income and 43.6% increase in premium in the medical insurance category.

Life Insurance Sector

Insurance companies generated 66 trillion rials ($550 million) from life insurance policies in the last fiscal year (ended March 2019), indicating 42.3% increase compared to the year before.

Also, the share of life insurance from total premium income was 14.5% -- an all-time high.

Insurers paid 23.9 trillion rials ($211 million) in life insurance claims last year -- 56.3% higher than what was paid the previous year. The total number of claims in the category was 519,000 in the 12-month period, down 30%.

Insurance industry experts say there should be a close relationship between insurance indicators and economic and social indicators as the level of insurance coverage is normally considered an indication of welfare and cultural development in a society.

Therefore, economic constraints, people’s disposition toward the insurance sector, level of government support and public participation in insurance-related activities determine, to a large extent, growth of the key insurance industry, or the lack of it.