EghtesadOnline: Following the policy of promoting life insurance, the president of Central Insurance of Iran announced that the High Council of Insurance has issued the license for the establishment of another specialized life insurance company.
“CII is licensing new specialized life insurance companies to expand the share of this type of policies across the country,” Abdolnasser Hemmati was also quoted as saying.
Middle East Life Insurance Company, affiliated to the Middle East Bank, was the first specialized life insurance company in Iran. The company had been officially established with an initial capital of 1.2 trillion rials ($37.9 million), after CII approved the board members of the firm in October 2016.
Hemmati hoped that specialized life insurance companies will increase public awareness about the benefits of life insurance policies, according to Financial Tribune.
“Specialized life insurance companies can boost their revenues through marketing because out of Iran’s 80 million population, only 20% of them are covered by life insurance policies,” he added.
Last year, CII announced that it will no longer issue any permits for the establishment of new general insurance companies, saving them for specialized companies.
Hemamti–who also serves as the head of High Council of Insurance–noted that the Sixth Five-Year Development Plan (2017-21) foresees that the share of life policies in insurance industry will reach 21%, as the figure now stands around 14%.
The official opined that such a growth will take place only if the public is educated on life insurance.
Asked whether life insurance companies offer returns of 22-24%, the official replied that CII has set the minimum interest rate of life policies at 16% which can be appealing to investors since it is higher than what banks are allowed to offer [15%].
“However, if insurance companies make good investments in various economic sectors and earn more profit, they pass it on to their investors and customers,” he added.
Hemmati considered the separation of life insurance accounts of insurance companies from the rest of their balance sheet as another move by CII to ensure there are enough resources for life insurance policies.
“Earlier, insurance companies invested their assets in banks at high interest rates but now that bank rates have significantly dropped, such a thing cannot happen again,” he concluded.
Reducing Government Role
According to Hemmati, , divesting government’s shares in Asia and Dana insurance companies is now a top priority.
He noted that according to the Sixth Five-Year Development Plan, government’s stake in Asia and Dana insurance companies must be divested by the end of next Iranian year on March 20, 2019.
“Economy Minister, Masoud Karbasian also believes that government should relinquish its share in the insurance industry and only keep Iran Insurance Company as the only state-owned insurance company,” Hemmati added.
The head of High Council of Insurance announced that the process of divesting government’s share in Dana and Asia insurance companies will be completed through Iran Privatization Organization.
Hemmati also noted that German and Italian firms are eyeing shares of private insurance companies in Iran which has nothing to do with divesting government’s share in aforementioned companies.
“Foreign firms are trying to buy the shares of private insurance companies that are listed on the stock market. Now the matter could be done through recapitalization of the insurance company or the foreign party can buy the shares of current shareholders who want to sell”.
According to the Sixth Five-Year Development Plan (2017-22) and based on Article 44, in order to expand the activities of insurance industry and improve the business environment, state-owned shares in insurance companies, with the exception of the Central Insurance of Iran and Iran Insurance Company, should be divested.