Focus: Insurance

Healthy, Wealthy, & Wise

Healthy, Wealthy, & Wise

May. 12, 2013

The Iranian people are no strangers to insurance, as in one form or another it has been a part of their culture for 4,000 years. Insurance as it is today has been around for more than 80 years in Iran. On November 6th, 1935, the first Iranian insurance company was established under the name of Bimeh Markazi, which offered a variety of products to cover all areas of life and non-life business. “There have always been traces of insurance in our culture, which is why I firmly believe that our people have been accustomed to different types of insurance," Seyed Mohammad Karimi, President of Bimeh Markazi Iran, told TBY.

Although the entire industry largely began as a government-run enterprise, in recent times, the Constitution of the Islamic Republic of Iran has moved to reverse this situation. Today, of the 25 insurance companies in the Iranian insurance industry, 24 are privately owned.

Although life insurance is the sector of the future, auto insurance still makes up approximately 50% of the market. In 2012, 90% of Iran's 14 million vehicles were insured. As Iranian roads see 1.5 million cars added to the fleet each year, auto insurance will always be a dominant area of the market. The second largest insurance sector in Iran is the personal accident and health insurance sector. Accounting for a 22.3% market share, health and accident insurance was worth $1.3 billion in 2011. This sector also has a very solid growth rate year-on-year, up 18% in 2012 compared to 2011. However, life insurance premiums displayed the fastest rate of growth, increasing by 97.5% in 1Q2012 compared to the same period in 2011.

On the whole, the insurance sector's size, at some $10 billion in August 2012, represents some 1.8% of GDP, indicating further room for growth. Compared to the region, Iran was number one in insurance premium volumes in 2011, with a value of $8.2 billion. The nearest rival to Iran was the UAE, with a value of $6.6 billion in the same sector; however, when comparing Iran's life insurance premium volumes, it lies in fourth position ($457 million), while the UAE tops the list at $1.2 billion. This has led Bimeh Markazi, the central market regulator, to launch a new initiative to increase life insurance products by opening up the market and introducing new products such as annuity, disability insurance, and housewives' annuity, as well as coverage for disasters such as earthquakes and fire.

Another area of the insurance market that is about to see a huge boom is maritime insurance. As of July 1, 2012, Western companies were no longer allowed to insure oil tankers transporting oil from Iran. Since European companies previously insured 90% of all oil tankers carrying Iranian crude exports, the restrictions opened up a new market for the local insurance industry. The current situation is providing a huge opportunity for Iranian insurance companies. With coverage of up to $1 billion needed to cover for the risk of accidents or related incidents, the growth of the maritime segment could prove lucrative in the long term.

LEADING ACTORS

Under the guidance of the fifth Five-Year Development Plan (FYDP), the insurance sector regulator, Bimeh Markazi, has laid out plans to increase insurance penetration and make the sector more competitive in the coming years. With a focus on raising awareness about life insurance, Bimeh Markazi is supporting the 24 non-governmental insurance companies in the country as they diversify their portfolios and offer innovative products to the customer base.

To support this cause, Seyed Mohammad Karimi, President of Bimeh Markazi, explained that the regulator is “in the process of developing annuity, disability insurance, housewives' annuity, as well as insurance for artists, musicians, and national heroes, in addition to other segments that can be covered by life assurance policies." Bimeh Markazi is also campaigning to educate Iranians on the benefits of using insurance to manage both their health and wealth.

The largest private insurance provider in Iran is Asia Insurance Company (AIC), which boasts an annual turnover of around $800 million in premiums. Experiencing 54% growth year-on-year from 2011 to 2012, AIC is a leader in the insurance market, especially in the area of life insurance. With an 11% share in the life insurance market and a 12% share of the insurance sector overall, the company seeks to increase its shares in the coming year, especially as it develops new segments such as earthquake and fire damage coverage.

To grow the company further, A. Hajfathaliha, Managing Director and Member of the Board at AIC, explained that the company welcomes FDI and is currently conducting feasibility studies to open branches in several neighboring countries, complementing the 100 branches the enterprise operates domestically.

According to Hajfathaliha, “AIC is one of the oldest insurance companies in the region. It issues over 6 million policies a year, which is second to none among regional companies." To sustain this success and promote further growth, AIC is expanding its sales network in the region and cooperating with insurance and reinsurance companies as well as foreign entities that may be interested in investing in the Iranian insurance market in 2013.

In terms of the automotive and motorcycle segments, Alborz Insurance Co. has taken several initiatives to provide third-party liability insurance with outstanding services. “We have been customer-oriented through the years to provide value-added services," M.E. Amin, Chairman and Managing Director of Alborz Insurance Co. said, adding “We conduct a very rapid evaluation of claims and disperse payments quickly, which is highly attractive for our clients today." Currently, the auto segment comprises 42% of the company's activities, with health and life insurance making up 20% and 6%, respectively.

Following the examples of AIC, Alborz Insurance Co., and several other insurance sector actors, a 10% stake of Mellat Insurance was offered on the Tehran Stock Exchange in July 2012. The IPO took place at a market capitalization of $162 million, and the company has forecasted net earnings of $29 million for FY2012.