Based on a recent study report released by IRC entitled “Exploring the Strategies of Minimizing the Effects of Inflation on Life Insurances”, reducing the inflation in economy will lead to growing demand and consequently accelerating life insurance penetration rate. Life insurances are considered as long term insurance contracts and the effects of inflation on them are much more evident compared with other lines of business. High and consistent, the inflation in Iran not only has made its associated risk, an exclusive risk for the insurers, it has devastating effects on savings especially savings from life insurances, according to PRIAO report.

The present study is an attempt to examine the status of inflation and life insurance in Iran and the world. It also portraits the reciprocal relationship between life insurances and inflation and finally, it maps out some strategies in order to reduce the inflation effects on the life insurances.

According to the results of this study, issuing life insurance policy based on the price of gold or the exchange rate of a foreign currency, linking life insurance to inflation-related indices, sharing the benefits derived from the insurer’s investments with the policyholder are some of the strategies to diminish the harmful effects of inflation on life insurances. Other strategies suggested in this study include involving the policyholder in Mudarabah-based investments, offering unit-linked life insurance plans, issuing policy based on the investment units, purchasing extra coverage by the policyholder every other year, increasing the interest rate of life insurances, and employing insurance-linked securities for company assets investments.

The full text of the report in Persian is available at this link.