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EghtesadOnline: Negative scores in the record of auto policyholders shall be included in determining auto insurance rates, head of the Central Insurance company of Iran announced this week.

“CII and the Traffic Police department have started a new round of collaborations. Police will provide insurance firms with access to Motor Vehicle Reports (MVRs), including the negative scores and history of accidents, giving insurers the leverage to charge high-risk drivers with higher rates for the personal auto policies,” Abdolnasser Hemmati told state TV.

The measure is part of a new auto insurance law, and aims to reduce the rate of road accidents. Iran has one of the world’s worst road mishap record.

As per law, insurance firms are required to pay a portion of their annual revenues to the police, to be used for lowering the rate of road accidents.

“The sixth five-year development plan (2016-21) will hopefully allow us to use driving history of policyholders’ as the only criterion for auto policy  rates,” he added.

Back in November, lawmakers instructed the CII and Law Enforcement Forces to develop a framework for determining motor insurance premiums based on drivers’ behavior, before the end of the next five-year economic development plan. The law says that insurers should offer added incentives to safe drivers.

“Moreover, drivers causing major harm will be charged 5-10% of the total paid cost for each incident,” Hemmati said.

PAP is the mainstay of Iran’s insurance industry.  According to CII, it accounted for 37.6% of insurance firms’ total premiums during the previous fiscal year that ended in March with insurers selling some 19.18 million PAPs in the period.   

While on the surface it may seem that PAPs should be to the benefit of insurance companies, however, official data shows that insurance firms are suffering huge  losses because of the PAPs. Insurers are also in the habit of undercutting each other in this category as part of a past unhealthy habit to lure more clients.   

“Last year insurance firms paid a total of 87 trillion rials ($2.7 billion) in claims to over 1 million accident cases in the PAP category,” Hemmati added.

 Easing Claims Payment

The top insurance authority announced that claims less than 63 million rials ($1,770) will be compensated by insurers without requiring drivers to provide police accident reports, raising the cap by 13 million rials.

Hemmati urged domestic automakers to increase the quality of their vehicles. “Carmakers will be responsible for paying losses, in case the low quality of cars is found to have caused the accident.”

Pointing to the importance of promoting life insurance category, he said: “By encouraging people to purchase life insurance policies we would be able to lift the penetration rate of insurance schemes–which now is barely 2%.”

He said insurers should keep enhancing the claims payment process, making it “more precise and efficient”, reports Financial Tribune.

Insurance law has obliged insurers to reimburse car insurance holders’ losses within 20 days. Delays in payment will be subject to penalties.

Auto Insurance MVRs auto policyholders Motor Vehicle Reports