The Competition Protection Agency (CPA) in Kuwait has suggested an updated study setting minimum prices for motor third-party liability (MTPL) insurance.
There have been complaints about excessively low premiums in the insurance market. The agency holds the view that this practice is facilitated due to insurance companies controlling brokerages.
The CPA indicated that insurance brokers exert influence, controlling MTPL insurance business. Around 70% of the premiums they generate are from MTPL insurance business, according to a report by Al Rai Media.
The discussion revolved around brokers who are strong in the market or have strong relationships with insurers, which enable them to sell MTPL insurance at discounted prices.
The study said that the lack of transparency and inappropriate administrative practices are associated with insurance companies’ ownership of shares in other insurance companies and brokerages, which may affect competition.
The study noted that the MTPL insurance prices of the major insurance companies are almost all the same, as in comprehensive motor insurance where premiums range between 3% and 5% of the value of a vehicle. However, the study stated that this is not the result of collusive practices among insurance companies, but rather it is due to the rules of competition for suppliers of insurance products.
If the situation is due to a lack of risk control, or a lack of minimum price regulations, the study indicated that potential threats to competition can be exacerbated by low prices, increasing market concentration and strategic constraints, preventing innovation. M