A 400% increase in car insurance cost is expected during this year. According to majority investors, this step will force the car businesses to close. The increase in insurance premium is not applicable on a specific category of investors but to all kind of vehicles. The representative of Riyadh Chamber of Commerce and Industry has announced that the new insurance premium charges will be applicable soon. Investors have openly rejected the justification of insurance industry for an increase in prices of insurance contracts. As per their opinion, it is just tactics of insurance companies to make profits as they already made during 2014 up to SR 735 million in 2014.[irp]
The attendants of the meeting have lambasted the increase in the price of insurance fees. They have expressed their worry for over burden on investors and other customers of the car industry. There is a need to review the increase in prices in order to ensure continuity of businesses and investments. Every time a customer buys a new car, he has to cover the insurance fee before taking the ownership of the vehicle. Especially if the car is sold on the lease it is mandatory for the customer to back the security of vehicle with insurance company services.
Majority customers don’t have enough knowledge about the insurance services and increase in fees. Insurance companies take advantage of this fact and try to overcharge them. It leads to financial and administrative problems for businesses and individual customers. Insurance company representative has mentioned the real cause behind the hike in insurance premium is due to covering traffic accidents of vehicles and fines for breaking laws. The justification does not sound real and investors have requested companies to review their decision.
The insurance industry has recorded 4,000 fake incidents in order to back their decision for an increase in prices of the insurance premium. The costs of accidents and amount paid out to customers have been recorded wrong in order to increase the prices. Investors had requested the insurance industry to write a letter to the Ministry of Interior for review the laws providing lame compensation benefits for fake accidents caused due to the carelessness of drivers. The increase in accident ratio is due to insurance support which has made drivers careless about safety measures.
The Traffic Department and Al-Alm were about to initiate an SMS service in order to limit the fraud cases of accidents. This service proposed to provide an SMS to drivers on violation of traffic rules. However, the Traffic authorities rejected the proposal of that system which would further lead to increase in fake incident cases. SAMA has reported already huge profits of insurance companies and resolved that there is no need to increase the prices further in order to cover losses.[irp]
According to the reports, each investor and customer of an insurance company has spent on average SR 991 on insurance fees. On average SR392.9 million has been earned by insurance companies in a month and about SR33 billion per year by these insurance companies by issuing 6500 policies every day.
Source: Arab News