The Ministry of Industry, Trade and Supply, which currently supervises the insurance industry, has assured the Jordan Insurance Federation (JOIF) that it would conduct studies into losses in compulsory third-party motor insurance and find solutions to the issue that would be satisfactory to all parties.
Revealing this at a recent media conference, Dr Ali Al-Wazani, JOIF Chairman, said that the association had again approached the Ministry and other authorities about stemming the huge losses which insurance companies have been running for several years in compulsory third-party motor insurance, reported Hamrin News.
A number of insurers started discussing among themselves recently the possibility to stop issuing motor mandatory third-party liability (MTPL) insurance policies early this year in a move to avoid losses. Insurers have for several years urged that immediate measures be taken to liberalise motor tariffs which are capped by the government.
Dr Al-Wazani said that the authorities understand the negative impact on the insurance sector of the losses, which have pushed several insurers to exit the business. He said that there is no convincing justification for insurers to support losses in this class of business.
He added that the Industry and Trade Minister had assured JOIF that the ministry would conduct studies and find solutions in partnership with JOIF. He said that the Ministry promised to undertake an actuarial study of MTPL insurance and the extent of losses suffered by insurers, and consider the possibility of a gradual lifting of tariffs which are set by the government.
It is uncertain whether the Ministry’s assurances would placate insurers and pre-empt them from quitting the MTPL business this year. This is because insurers are likely to have to wait further for reform because supervision of the industry is to be transferred from the Ministry to the Central Bank of Jordan next year.
JOIF estimates cumulative losses from MTPL insurance at JOD220 million (US$310.5 million) between 2005 and 2015. Losses, which in 2015 amounted to JOD17 million, are anticipated to reach JOD20 million in 2016. MTPL insurance accounted for 27.4% of total non-life premiums in Jordan’s insurance industry, but claims paid in this class made up 57.9% of non-life paid claims in 2015.
Dr Al-Wazani added that there are 1.4 million vehicles in Jordan and about 150,000 car accidents each year. The number of deaths from traffic accidents each year in Jordan is around 900.
He repeated JOIF’s call on the government to liberalise motor tariffs and leave insurers to compete among themselves as in other sectors.
JOD1 = US$1.41