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Iran: Govt's big hand in economy hampers insurance growth

Source: Middle East Insurance Review | May 2017

The government’s big role in the economy and a lack of development in key economic sectors are the two main reasons for Iran’s low insurance penetration rate compared to those in other countries, the head of the Central Insurance of Iran has said.
 
   “I do accept this [that the penetration rate of insurance is lower than what it should be],” Mr Abdolnasser Hemmati, President of the insurance regulatory agency, said, according to Financial Tribune.
 
   “Ours is a developing country and there are several reasons as to why the culture of insurance has not been entrenched in the country. One of them is that our economy is oil-dependent, and when this happens and an economy revolves around the government, which owns a majority of companies and organisations, the people feel that when an accident happens, the government will make up for the losses,” he said.
 
   “We believe that the more we move away from a state-controlled economy, the more we will witness the growth of insurance in society,” he said.
 
   Mr Hemmati also said that people tend to believe that more basic needs must be dealt with first, and then they can address other things such as insurance.
 
   When a considerable part of the population is struggling with basic problems such as housing and food, “they cannot think of insurance”, he added.
 
   He noted that the growth of the insurance sector is currently satisfactory and for the first time, the penetration rate of insurance surpassed 2%, standing currently at 2.1%. When he was first appointed as the head of CII in 1994, the rate was 0.34%.
 
   In comparison, the average ratio of premiums to GDP in the world is currently close to 6%.
 
   “The 6% is for life and non-life insurance categories combined,” he said, stressing that life insurance contributes a huge portion to the insurance market globally. He said that the situation is the reverse in Iran, where life insurance makes up 13-14% of the overall insurance portfolio.
 
   He said that therefore, it would be difficult to increase the penetration of insurance with non-life insurance alone and “we must strive to increase the penetration of life insurance as well”. M 
 
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