NCCI has raised the Rukhsa Insurance rates for young drivers holding Temporary Permits and those who are under 21 years holding a Private Driving Licence. The Company raised the annual insurance rate from SR 710 to SR 1200 or those holding Temporary Permits (less than 18 years); and from SR 530 to SR 1000 for drivers holding a Private riving License (under 21 years), says Mr. Saad A. Al Marzoqi, Vice-President - Technical, NCCI.
Mr. Marzoqi said that the results of Rukhsa Insurance during the first half of the current year showed a very high ercentage of loss ratio relating to young drivers, in particular, and other categories of Rukhsa Insurance in eneral.
Consequently, Rukhsa incurred claims were more than earned premiums, general and administrative expenses and olicy acquisition costs paid by the Company to provide such cover. Furthermore, he stated that this trend in results started in 2003.
Mr. Marzoqi pointed out that the increase of Rukhsa Insurance rates for young drivers would only be applied on new policies issued and on renewal of those policies relating to drivers for whom NCCI had paid indemnities to third parties in respect of traffic accidents caused by them during the previous period of insurance.
He asserted that the new incresases will not include renewals for drivers whose historical record is free of traffic accidents.
FRAUDULENT CLAIMS TOP SR 4M
Commenting on the increase in the loss raito, Mr. Marzoqi attributed it to many factors. "The most important factor is the linking of compulsory insurance to the Driving Licence instead of with the motor vehicle itself.
This has led to the spread of fraudulent and deceptive claims and difficulty in control, despite the efforts exerted by the Company in coordination with Traffic Department officers". In addition to 23 fraudulent claims discovered by NCCI during 2003, the Company discovered, during the first half of the present year, more than 250 fraudlent claims in Motor and Rukhsa Insurance.
The total amount claimed in these frauds exceeded SR 4 million and necessary legal action was taken against offenders.
Mr. Marzoqi said that NCCI was presently studying the increase of rates for other categories of Rukhsa Insurance, for which the loss ratios were increasing gradually.This includes Private Licence for drivers above 21 years, where their general loss ratio has almost reached 100% during the first half of 2004.
"Mr. Marzoqi explained that the rate increase by NCCI on young drivers takes into consideration three factors:"the number of traffic accidents caused by the driver during the previous period of insurance; the amount of indemnity paid by the Company for each accident and the percenatage of the insured's liability for each accident, as decided in the Traffic Police Report".
He stated that NCCI has taken this step on the basis of purely technical factors "without considering competition, because the Company will not manipulate prices and compromise its reliability and faithful commitment towards its clients". At the same time, the Company will not allow exploitation of insurance by reckless drivers within this age group, whilst recognizing in the process, those who are safe drivers and are a lesser risk.
It is worth mentioning that NCCI has paid SR 200 million during the first half of this year for claims resulting from motor accidents in which its clients were involved. Out of this amount, the Company paid SR 114 million to third parties for traffic accident caused by its Rukhsa Insurance clients. In 2003 the amount paid by NCCI exceeded SR 300 million.
Dr. P K Pillai
© Saudi Commerce and Economic Review 2004
