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Jordan: Insurance companies call for rise in motor premiums

AMMAN -- The government and leaders of the insurance sector will meet over the coming two and half months in an attempt to thrash out a series of agreements on outstanding issues, including a demand by insurance companies to raise motor premiums.

The announcement was made following an Iftar banquet at the Jordan Insurance Federation (JIF) earlier this week, when the two sides agreed to set up a committee to debate the issues comprising representatives from the JIF and the Insurance Commission (IC), the government's regulatory arm.

"We can hopefully solve these issues by the end of the year," said Minister of Industry and Trade Sharif Zu'bi, after listening to remarks by chairpersons and top executives of local insurance companies.

During the meeting the minister described the majority of the sector's demands as "rightful."

Top of the list of concerns is the issue of mandatory motor insurance, according to JIF President Abdul Salam Tarawneh, who said JIF member companies are suffering heavy losses in this sector, which accounts for a large percentage of their operations.

The organisation's secretary general, Maher Hussein, said annual losses in this sector range between JD5-6 million, noting that the figure had reached JD5.4 million in the first half of 2006 alone.

Car owners currently pay a premium of JD55 a year, in accordance with a mandatory system. Part of the losses is offset by motor insurance on foreign vehicles (JD110 a year) and non-compulsory insurance.

The JIF seeks to address the losses by raising premiums and making car owners who commit more traffic violations liable to higher premiums.

Hussein said for such a proposal to be effective, changes are required to the regulations governing the sector, including defining those violations that would be subject to the proposed changes.

In response to remarks by Zu'bi about the humble contribution of the insurance sector to the country's Gross Domestic Product (GDP), which stands at 2.4 per cent, the sector leaders called for enacting laws to enhance their operations.

Their demands include compulsory insurance on the construction sector and a mandatory medical insurance system to include all employers, regardless of the number of their employees.

Tarawneh accused certain establishments of "illegally" practicing insurance, citing the Jordan Engineers Association and large companies like the Jordan Cement Factories Company. Some of these organisations, he said, collect premiums and issue policies for their members and employees, bypassing insurance companies.

"We have to end this practice and impose other types of compulsory insurance to correct the sector's contribution to GDP."

His deputy, Wasim Zurub, said per capita contribution to the insurance sector is about JD35 a year, adding that the bulk for this burden is shouldered by certain sectors such as industry.

The insurance representatives also took the opportunity to discuss with Zu'bi and the IC's director, Bassel Hindawi, their objections concerning amendments to the Income Tax Law, saying insurance companies should not be classified in the same category as banks.

The government proposed an income tax rate of 20 per cent in this category, but the Lower House Financial Committee increased it to 35 per cent. Parliament has yet to vote on the proposed amendments.

Insurance executives said their taxation rate should be proportionate to profits, which stand at 11-12 per cent a year.

By Mahmoud Al Abed

© Jordan Times 2006