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Jun 2019

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Tunisia: Structural issues affect insurance industry's profits

Source: Middle East Insurance Review | May 2019

The Tunisian insurance industry is estimated to have posted a net profit of up to TND100m ($33.2m) for 2018, according to Mr Hafedh Gharbi, president of the insurance regulator, the General Insurance Committee (CGA).
 
This figure reflected difficulties the 22 insurers in the market are complaining about, which makes insurance less profitable than other sectors in the financial services field, Mr Gharbi said in an exclusive interview with the news agency Tunis Afrique Presse.
 
Total premiums collected by the insurers in 2018 are estimated at TND2.4bn, 14.8% higher when compared to premiums of about TND2.1bn in 2017, according to CGA preliminary data. The premium growth last year was faster than in 2017 when the increase was 12.4%.
 
The market remains constrained by the size of insurers, few of whom have sufficient means to drastically boost their turnover.
 
Mr Gharbi said, “We have 22 companies active in the insurance sector, and most of them are medium or weak companies, and do not have the financial ability to install sophisticated information systems to assess risks in an effective manner.”
 
Of the 22 companies, at least three insurers reported losses in 2018 due to compensation exceeding premiums, he said, adding that the insurance market suffers from a number of problems, like high compensation in auto insurance.
 
Motor business
Motor insurance contributes about TND1bn or around 50% of total written premiums, while compensation paid to customers amounted to TND800m. The decline in the value of the Tunisian dinar has caused hikes in the prices of auto parts that, in turn, have led to higher claim amounts.
 
Mr Gharbi said the bonus-malus system is not being implemented effectively in motor insurance because of issues like patronage and human intervention in calculating rewards for customers.
 
Tunisia remains one of the few countries where the government determines insurance tariffs. Insurers in Tunisia are currently unable to set premium rates on their own because they do not possess a sophisticated information system capable of accurately assessing the risks of their customers and applying the reward system without any interference, he said.
 
On a brighter note, he pointed out that in January 2019, a data exchange system, involving insurers, the CGA, the Technical Agency for Land Transport and the General Insurance Institute (IGA), was established. This would make the bonus-malus system operate more effectively and be more objective.
 
Mr Gharbi said that improving the performance of the insurance sector requires a variety of solutions, including directing the activities of insurers to lucrative insurance branches, updating their information systems, and establishing good governance and rules of sound conduct. M 
 
TND1 = $0.33
 
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