Muscat - The rising cost of motor spare parts and repairs charged by dealers is badly affecting the performance of insurance companies in the sultanate, according to the Oman Insurance Association (OIA) and industry executives.
According to executives, motor insurance, which accounts for over 50 per cent of the total insurance premiums in Oman, continues to be badly impacted by the high frequency and severity of road accidents, with the escalation in the cost of repairs and spare parts making matters worse.
Speaking to Muscat Daily, Nassir al Busaidi, chairman of OIA and managing director of Oman United Insurance Co, said that the cost of spare parts and labour charged by dealers in Oman is significantly higher compared to other GCC countries.
He said, "Insurance companies are badly affected as dealers charge higher prices for spare parts and repair."
Busaidi said that insurance companies, through the OIA, are working with the Capital Market Authority (CMA) and the Public Authority for Consumer Protection (PACP) on controlling the high costs.
"Something needs to be done to rein in dealers who charge excessively. What insurance companies pay to dealers in terms of cost of repair and spare parts is too much. We hope CMA and PACP will take this matter seriously and take action because it is badly affecting insurance companies and car owners," Busaidi said.
Under Oman's new unified motor vehicle insurance policy, every damaged vehicle must be repaired with the concerned dealer if the vehicle has been used for less than one year from the date of registration, which, insurers say, gives a monopoly to dealers in the market.
K Krishnamurthi, assistant general manager at Risk Management Services LLC and OIA board member, said motor insurance premiums are almost similar all over the GCC, while the cost charged by dealers is higher in the Omani market.
He said, "Insurance companies are bleeding and making a lot of losses on their motor portfolio as the number of accidents and cost of repairs are continuously going up. We expect dealers to bring down the price of spare parts and repairs in line with that prevailing neighbouring countries."
Rawny Khadr, vice president of marketing and development at Dhofar Insurance, said, "If the insurance premium was adequate relative to the claim ratio, then the higher cost of spare parts and repairs charged by dealers would not be an issue. But the cost of spare parts and repairs increases every year, whereas the price of premiums goes down due to competition in the market."
"As an insurer, I do not mind if our clients get the best-quality products or best-quality garage or dealer, but if we cannot increase the price of premiums, in line with inflation, then how are we supposed to compete in the market. There needs to be a balance between the prices charged by dealers and the price of premiums," added Khadr.
© Muscat Daily 2013
