EghtesadOnline: Iran Insurers’ Syndicate has called on the government to release details about how third-party auto insurance tax revenue is spent. The syndicate has strongly opposed imposing higher taxes on insurance companies.
“We want to know in detail how insurance companies’ payments are being used. Moreover, the industry cannot live with higher taxes as proposed in the Integrated Fire Management and Control Bill,” Mohammad Karimi, the general director of the syndicate, told the National Conference on Insurance and Development on Sunday.
The bill proposes levying 10% tax on insurers’ income from third-party auto insurance policies to be used for setting up an integrated fire management system.
As per law, insurance companies pay 30% of their revenue from the sale of mandatory third-party auto insurance policies - the segment with the highest share in insurance companies' portfolio -- to state bodies and organizations.
Companies are required to also pay 8% of their premium income from third-party auto insurance to the Bodily Injury Indemnity Fund.
Legislation approved in November 2015 made it possible for the fund to indemnify third-party policyholders in the event of insurance companies’ failing to meet their obligations due to either insolvency or inadequacy.
The BIIF, established in 1969, is affiliated to the Central Insurance company of Iran and aims to compensate bodily injury in different insurance sectors. But since third-party insurance was passed into law in 2015 after a seven-year trial period, BIIF now covers this area as well.
Police, Emergency Medical Services and Iran Road Maintenance & Transportation Organization have a share from tax paid by insurance companies. The money ostensibly is used for reducing road casualties.
A 10% share of the tax revenue goes to the Health Ministry. Earlier in March and after the outbreak of the Covid-19 plague, insurance companies paid 4.5 trillion rials ($30 million) to medical centers affiliated to the ministry.
Insurers are reluctant to pay this tax because they insist organizations receiving the money should regularly report on where and how they spend the money and how these mandatory payments benefit the insurance industry.
An estimated one-third of insurance revenue comes from the auto insurance category. Generating 204 trillion rials ($850 m), this segment posted annual growth of 39.7% as more households own cars.
Personal auto insurance tops the list of insurance categories in terms of share of claims alone accounting for 40% of the total payouts.