As per December instructions by SAMA to be applied on 1st of April:

Riyadh, Mar 27th, 2017

In application of the Saudi Arabian Monetary Authority (SAMA) instructions, insurance companies are required to provide a no-claim policyholder with a discount when pricing individual mandatory motor insurance policies, provided that such a discount is applied on the base rate. Further, based on SAMA circular issued last December to all local insurance companies and posted at SAMA official website, the new instructions are to be applied starting from Saturday, 4th Rajab 1438, corresponding to 1st April 2017.

This discount is calculated based on the number of years a policyholder has not made a claim. Further, the discount could go up to 15% to be applied to the rates in force for insurance policies extending to one year with no claim being made, and it increases according to the number of years without a claim, going up to 30% for three years where no claim has been made. According to the instructions, insurance companies may also offer a no-claims discount for individuals’ comprehensive motor insurance. Additionally, insurance companies may provide a further loyalty discount of up to 10% to their existing customers on the new price for mandatory motor insurance and individuals’ comprehensive motor insurance. However, this loyalty discount should only be provided upon renewal of a motor insurance policy with the same company upon its expiry provided that no gap in  coverage exists. 

In its circular (No. 101 issued by the Saudi Arabian Monetary Authority (SAMA) on 27th Rabee Al Awal 1438, corresponding to 26th December 2016), regarding subscription instructions for motor vehicle insurance; SAMA stated that the issuance of these instructions comes as part of its role to protect policyholders and promote fair competition in the insurance sector to ensure provision of better insurance services at competitive prices. In the case of pricing of motor insurance policies, the insurance sector in general has not been giving any advantage to policyholders who have claim-free records. This means that the policyholders who are less likely to make claims incur a part of the insurance costs for policyholders who are more likely to make claims.

Basem Odeh, Chairman of the Insurance Executive Committee, stated that the insurance sector is looking forward to following these important instructions, which supports the principle of fair pricing; rewarding of policyholders who are keen on complying with traffic laws and safe driving rules by not putting them on par with others. He also expressed his hope that the new mechanism approved by SAMA would raise public awareness of the importance of safe driving and avoidance of causes of accidents that  lead to tragic loss of life and property.

Mr. Adel Al-Issa, the official spokesperson for insurance companies, said that insurance companies will be ready to follow SAMA’s instructions in a timely manner, since they are developing automated systems to meet the new pricing requirements. He also added that the sector has been previously working closely with SAMA to develop an easy-to-use electronic tool to check previous records of insurance applicants. This tool was ready so that the new insurer is held responsible for accessing the policyholder’s record to check whether its record is free of claims to help policyholders save time and effort required to obtain certificates, from several companies in some cases, to prove that they have claim-free records.  He added that companies will communicate with the public regularly in the coming days to explain any developments in this regard and respond to any inquiries or questions about how companies would follow these instructions.

Al-Issa stressed that SAMA had obliged insurance companies to follow strict actions in the coming period that requires more accurate criteria be generally adopted in pricing of insurance policies. This will be positively reflected on the policyholders of no-claim records in particular.

Mr. Al-Issa also stressed the importance of all retail clients to be aware of their rights especially under the new law. He also asked them to access and understand the information available on this matter. Mr. Al-Issa pointed out that in case of non-compliance with SAMA instructions, it is the client’ right to submit their complaints to the concerned insurance company. In case a company fails to address and solve the complaints filed, promptly and within a reasonable time frame, it is the clients’ right under the law to file a complaint to the Consumer Protection Department, SAMA. In case they suffer any breach to their rights or any unfair practices or any fraud, clients may exercise their rights under the law and the regulations issued by SAMA by filing complaints to SAMA through any of the channels stated on SAMA website. This is to ensure fairness, efficiency and transparency in all transactions for sectors that falls under the supervision of SAMA and to ensure that the related statutory provisions are applied, since it is SAMA’s statuary obligation to protect all clients and stakeholders.

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