The Insurance Authority confirmed that it is reviewing the vehicle insurance pricing mechanism to ensure that insurance companies comply with regulatory standards, and to ensure fair and reasonable prices, according to a statement on its website.
The review is based on six criteria, namely:
- Insurance companies must ensure that product prices are fair and not exaggerated.
- Prices are in accordance with underwriting rules
- Prices do not fall below a technically acceptable level or cause insurers to lose money.
- Prices must be supported by reliable data and experience.
- An insurer should not rely solely on the prices charged by other companies.
- Insurers are to provide the Insurance Authority with the bases used in determining prices.
Shura Council urges improved insurance pricing
The review was announced several months after the Shura Council, the advisory body that reviews and proposes laws in the kingdom, in June, called for the development of a regulatory framework for pricing health and vehicle insurance and linking prices to claims data, risks, and usage.
In addition, the Shura Council advised the Insurance Authority to:
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strengthen the mandatory insurance system and expand it to cover high-risk activities and sectors
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to stimulate the reinsurance and insurance technology markets
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to expedite the development of a mechanism for the gradual transition from cash compensation in vehicle claims to quality-related repairs, thereby reducing the inflation of claims and increasing market efficiency
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to conduct a study to develop an index to measure the insurance system’s ability to manage and price strategic insurance risks, thereby enhancing its efficiency in supporting economic stability.
This means that reviewing vehicle insurance pricing does not necessarily lead to a general reduction in policy prices. Rather, it may curb unsupported price increases as well as prevent insurers from lowering prices to levels that harm profitability in order to gain market share.
The Council stressed the need to stimulate the private sector to expand its reinsurance activities, insurance technology, and specialised products, thereby deepening the insurance market and increasing its competitiveness.