Companies face losses, closure because of compulsory vehicle insurance — expert

insurance officer checking car accident
(Photo: Envato Elements)
AMMAN — The former director of the Jordanian Federation of Insurance Companies, Maher Al-Hussein, said that four insurance companies have been liquidated recently, citing compulsory insurance of vehicles as the main reason for companies’ losses, according to Al-Mamlaka TV. اضافة اعلان

Hussein said on Monday that the four companies are now legally liquidated, with the announcement published in the Official Gazette, but those entitled to compensation have not received anything yet.

According to him, the total losses of insurance companies because of compulsory insurance of vehicles since 2001 until today exceed JD370 million.

All companies that have gone bankrupt or are currently suffering, he said, deal in car insurance, which constitutes no less than 97 percent of their insurance portfolio.

Hussein stressed that between 100,000 and 200,000 people are directly or indirectly affected by the bankruptcy of an insurance company.

He said that the criterion used to measure an insurance company’s ability to meet its obligations is the so-called solvency margin standard, which should be equal to 150 percent of its obligations. He added that there are insurance companies that have a solvency margin of less than 150 percent, and even less than 100 percent.

“If the central bank wants to objectively apply the solvency margin, the number of troubled companies will increase,” Hussein said.

“Insurance companies lose a huge amount by underwriting compulsory insurance on vehicles,” he added.

He indicated that insurance premiums had increased by 100 percent since 2001, but in contrast, the underwriting has increased by no less than 600 percent, noting that accident rates constitute 6 percent of liabilities undertaken by these companies.

“The value of the premium paid by citizens on compulsory insurance is not at all commensurate with the size of the obligations incurred by insurance companies,” Hussein said.

He added that “major companies that have a local, Arab, and global presence have many other insurance products that ensure profitability, but such profits turn into losses because of compulsory insurance”.

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