Work is afoot to strengthen the supervisory environment in Jordan by updating regulations and preparing new laws, while supporting various initiatives to help insurers grow healthily. Providers need to diversify business to achieve sustainable growth, says Mrs Lubna Saqr Al-Humoud, Director of the Insurance Administration at the Ministry of Industry and Trade.
Jordan’s insurance regulatory framework, established in 1999 and various supervisory amendments effected in 2002, is in for a major overhaul with the supervisory tasks being shifted to the Central Bank of Jordan (CBJ) this year.
“We thought it would be appropriate to improve on the supervisory framework because there have been several developments since it was last amended,” Mrs Lubna Saqr Al-Humoud, Director of the Insurance Administration at the Ministry of Industry and Trade, told Middle East Insurance Review in an exclusive interview.
“The new regulations will pay special attention to improving insurers’ solvency margins by essentially creating transparent and clear standards to achieve this goal,” she said.
“We aspire to strengthen corporate governance for insurers to be in line with international standards. Moreover, we plan to put in place the necessary regulations to ensure the appropriate separation between life and non-life businesses. This has been the main recommendations of the government accompanied with the decision for putting the sector’s supervisory mission under the responsibility of the CBJ.”
The draft law is currently under preparation to be presented to the sector. It will then undergo the necessary formal legal processes to obtain approval from the authorities concerned.
“Jordan was a pioneering model in the region for being the first to set up a special regulatory framework for the insurance sector in 1999, and we intend to remain in the lead in terms of continuously revising and updating regulations to be in line with international standards,” said Mrs Al-Humoud.
New insurance contract law
There are also efforts to issue a new insurance contract law to govern the relationship between insurers and policyholders, she said. The new law aims to deal with all existing gaps which insurers and policyholders face in their contractual relationship.
“Provisions of the new law are being reviewed and the legislative authorities will look into it, hopefully, within this year,” she said.
A supportive environment
The past couple of years have witnessed the enforcing of new compulsory covers which have given a boost to insurance as a concept among public, noted Mrs Al-Humoud.
The domestic helpers insurance was enforced by the Ministry of Labour two years ago. More recently, the Ministry of Tourism issued a regulation obliging travel agencies to insure group tourists. In addition, there has been a regulation for valet parking companies to purchase insurance against liability.
“This trend is on the rise and makes insurance a common commodity in the society. This is a positive development that would open the door for greater opportunities for the sector.”
Insuring all Jordanians has been a goal for the government in the past five years. Now, a special consultancy house has been tasked to conduct a study to recommend the best way in implementing a comprehensive nation-wide healthcare insurance scheme. “We look to the insurance sector to play an essential role in this project. Insurers have accumulated experiences in this field, and setting a public-private-partnership model would be a win-win situation for all parties, including the government, insurers and, more importantly, the policyholders.”
Diversification and distribution
Insurers should not concentrate their businesses in motor and medical only, stressed Mrs Al-Humoud. “Diversification is the key to healthy growth. Some players are spreading their operations across various lines, and this has helped them improve their overall results. As a regulator, we see sufficient opportunities in the market for insurers to grow in other lines than motor and/or medical, and we support players to take steps towards expanding their operations beyond these lines.”
The regulator is also interested in expanding new channels of distribution, namely the online channel. “There is going to be a special part (of the new regulations) dedicated to regulating the online distribution to help insurers benefit from the opportunities this channel offers. There have been tremendous developments in the online channel, and we will ensure that the new law takes into account the latest developments regionally and globally.”
Sector witnessing healthy development
The growth rate of the market, around 6% in 2016, is acceptable considering the overall local and regional context, said Mrs Al-Humoud.
“More importantly, the profitability of the sector has improved. Over the past few years, the regulatory regime in Jordan has helped several troubled insurers forge strategic plans to overcome difficulties and return to the black. Many insurers are off the hook today thanks to the regulatory intervention where we worked with them on creating plans to put them on the right track.”
Measures to boost life penetration
Commenting on the life business in Jordan, she said that its penetration rate remains low compared to the average rate in the region, 0.2% against 0.5% respectively. “We hope to see tax exemptions to boost life business but this is a thorny issue because it has to do with the Taxation Law.” However, she said insurers can double the effort to increase public awareness and promote life insurance.
Strengthening the regulatory body
Becoming part of the CBJ should help the insurance regulatory body regain its strength and expand its supervisory team, noted Mrs Al-Humoud. “We have lost lots of our cadres as a result of abolishing the Insurance Commission three years ago. Today, CBJ is an independent entity with the necessary powers and resources to reinforce the regulatory team in a way that would help us serve the sector efficiently.”
As for the sector’s results this year, she said signs in January have been promising with most lines of business growing, some similar to the rates of the previous year and others growing at a faster rate. “Jordan’s insurance sector has strong fundamentals and still attracts investors. We receive requests from investors asking for new licences, but we would prefer that they consider acquiring one of the operating companies instead of setting up a new company. This will benefit all parties and help consolidate the sector.” M