Consulting Rates for Iranian Commercial Insurance, 2014, Volume 2: Personal Insurance

Authors: Dr. Alireza Daghighi Asli, Khashayar Tashtzar, Dr. Leili Niakan

Coordinator: Life Insurance Research Group


In insurance industry, rates should be fair in a way that both policyholders and insurers feel satisfied.

For the first time in Iran, Consulting Rates for Personal Insurance have been provided by IRC.  In providing these Consulting Rates, available data of insurance market have been used. By this, insurers can have access to accurate estimates. However, it must be noted that these rates are only suggested and there is no obligation for their use.

Key Words: Consulting Rates, Commercial Insurance, Personal Insurance.

Study on Computing Methods and Risk Assessment in Life Insurance

Authors: Dr. Ebrahim Abbasi, Dr. Leili Niakan, Khashayar Tashtzar, Ehsan Jalali Lavasani

Coordinator: Life Insurance Research Group


"Risk" is fundamental keyword in the knowledgebase of insurance. All activities are somehow related to this concept and have been formed based on this concept. The present study is performed despite the lack of Persian resources and literature regarding "risk" studies as well as its applied priorities. In this project, the definition of risk and related concepts are addressed and then risk measurement indicators are introduced.

Since the identification, analysis, evaluation, risk treatment, monitoring and feedback are the process of risk management, then there should be a precise definition of risk assessment and standards to be reviewed and if necessary new standards should be recommended. Also factors in determining the life insurance premiums are presented and their effect on calculations and examined. In this context, computational methods for a variety of life insurance products are introduced. Evaluation and calculation of life insurance risks from the perspective of laws and regulations in this field have been studied. Evaluation of Risk Assessment of life insurance in insurance companies could provide a prospect of gap between the status quo and what should be done theoretically and practically.

Key Words: Computing Methods, Risk Assessment, Life Insurance

Quantitative and Qualitative Analysis of the Insurance Penetration Ratio of the Iranian Insurance Industry in 2013

Coordinator: Insurance Economics and Financial Research Group


Insurance penetration ratio is frequently considered as one of the most significant indices of the performance assessment of the insurance industry of a country. This ratio is also employed as one of the yardsticks to compare different insurance industries across the world countries.

In the present report, the insurance penetration ratio is measured based on the official publication of Iran's macroeconomic statistics up to 2013. Grounded on these data, in 2011, 2012 and 2013, the insurance penetration ratio of Iran was 1.378, 1.849, and 1.73 respectively.

The analyses of these data indicate that although there has been a considerable increase in the penetration ratio from 1.38 in 2011 to 1.849 in 2012 and this can be connoted as a characteristic growth of the insurance industry against the negative growth of real GDP, the factors such as increase in blood money (TPL premium increase) and low economic growth of the country due to sanctions repercussions, had effected on such growth in the penetration ratios in these years. Due to the negative growth of GDP and low written premiums, the penetration ratio in 2013 was 1.734. The low penetration ratio in this year (from 53% in the last year to 24%) is reasonably because of low written premiums in two lines of TPL and health insurance as parts of insurance market portfolio. It is also noteworthy to mention that the exclusion of complementary health insurances of the retired population of Social Security Organization (SSO) and Civil Servants Pension Organization (CSPO) from the insurance industry portfolio, had led to low written premiums in health insurances.

An immense imbalance in the portfolio of the insurance industry has also been observed. While the compulsory insurances (TPL) have the highest share of the insurance industry, other lines such as life insurances, oil, engineering, transportation, credit, and etc. have the least share.

Considering the oil-based economy, the non-oil penetration ratio (i.e. the non-oil ratio of written premiums to non-oil GDP) was measured. Hence, in 2013, this ratio was 2.05 percent. The disproportionate development of the insurance services in the oil and non-oil sectors of the economy indicates that the oil industry is not exploiting the capacities of the insurance industry. At the meantime, the insurance industry has not been prosperous in entering the oil industry of the country.

Keywords: Insurance Penetration Ratio, Quantitative and Qualitative Analysis, the Oil and Non-Oil Sectors.

VAT in Insurance Industry: Current Situation, Global Experiences, and Adjustment Strategies

Coordinator: Insurance Economics and Financial Research Group


Insurance is one of the significant tools of risk management. It also serves as a trustable means for the business activists in order to promote entrepreneurship and increasing investment. Still as a tool and at the current economic situation, it can stand beside governments, in case of catastrophic risks, with the purpose of compensating for the general losses and fostering the national economy. In this report, by reviewing the relevant literature, conducting interviews and content analysis, the objectives, effects, and shortcomings of the value-added tax (VAT) in the insurance industry have been defined, delineated, and elucidated. Similarly, by drawing on the experiences of the selected countries such as New Zealand, South Africa, Japan, Australia, European Union countries, and the U.S. and with regard to their VAT systems in the insurance market across various lines such as general insurance, life, reinsurance, and businesses, agencies, and brokers, it has been attempted to provide classified and valuable information to the readers. Finally, the effects of VAT envied on the insurance industry, its consequences for different social classes, the welfare of the low income classes, middle classes, and generally for the national economy have been thoroughly examined. It seems that the problems and issues associated with levying VAT in the insurance industry is predominantly due to the lack of proper method of the tax payment – the problem which has been tackled in many developed countries.

Keywords: VAT, General Insurances, Reinsurance, Insurance Industry

Auto Insurance General Terms (Driver Accident): Reviews and Recommendations

Author: Fatemeh Atatalab

Coordinator: Property and Casualty (Non-life) Insurance Research Group


This study provides solutions for insurers, dealing with auto driver accident coverage, through investigating and analyzing insurance general conditions in other countries. In Iran, following the enactment of the rules on compulsory insurance (Bylaw No. 67 and 67/1) of the driver accidents, the insurance companies issue the policy, as a subsection of a third party insurance rather than an independent document.

In Iran, driver accident insurance does not have an independent proposal form and general conditions. This study is based on Iranian rules and regulations, Iranian insurance market experience and other countries experience about auto insurance. To achieve this goal, 4 prominent insurance companies are selected from different countries; their general conditions of driver accident insurance are studied and the corresponding remarkable points are explored.

This study provided the proposed guideline on auto insurance general conditions organized into four chapters namely “Overview”, “Insured’s Duties and Obligations”, “Insurer’s Duties and Obligations” and “Other Provisions and Reasons in Support of the Guideline”. The guideline aims to propose independent general condition and proposal form for driver accident insurance. One can find the comprehensive report available in Persian on the IRC website.

Keywords: Driver accident, General Condition, Claim Condition.

Auto Insurance General Terms (Third Party Liability): Reviews and Recommendations

Author: Fatemeh Atatalab

Coordinator: Property and Casualty (Non-life) Insurance Research Group


In this study we analyzed Iran TPL Act 2008 in order to identify existing ambiguities and shortcomings and strategies are offered to improve it. To achieve this aim, we studied rules and regulations, experience of different countries in TPL general conditions as well as Iran insurance market TPL Act. Several insurance companies were selected from six countries and subsequently were analyzed thoroughly.

In foreign countries, research studies concern authorized driver, sum insured, No-claim discount, general exclusions, claims, cancellation, other insurance, arbitration, fraud, policy changes,  additional benefits, personal accident, expenses, duties and obligations of insured and insurer and etc.

In Iran, rules and regulations were examined according to the legislative history of TPL Act. Then following the comparative study and analysis of insurance rules in Iran, amendments were made to improve the legislation. Results show that in the most countries driver's characteristics are important factors affecting premium rates. Policyholders are to disclose in the proposal form fully and faithfully all facts which he/she knows or ought to knows.

In this study, we provide the propose guideline on TPL insurance general conditions. The guideline aims to eliminate the existing shortcomings of the TPL Act 2008 and protect policyholder lefts. One can find the comprehensive report available in Persian on the IRC website.

Keywords: General condition, Authorized Driver, General Exclusion, Claim Condition

The Study of the Operational Results for the Third Party Liability Insurance (Motor), Over the Course of Law Implementing of Amendment of Third Party Insurance Law, 2008-2013

Coordinator: Insurance Economics and Financial Research Group


The main objective of insurance companies is to gain profit. Examination of the financial statements of insurance companies after the implementation of a law amending the third party insurance Act 2008- 2013 reflects loss of money in this field of insurance. The most important loss factors are: inefficiency of existing laws, the lack of detailed mechanisms of risk management in the field, prescriptive blood money rates, lack of facilities such as methods appropriate to the date circumstances, the absence of appropriate rise in commitments and rise in prices and uncontrolled inflation. Since the field of third party insurance constitutes a high volume of portfolios of these companies, this trend will face insurance companies with many problems and cause many personal and social problems.

In this report, changing process of production premiums, claims paid to third parties and the drivers accidents, the trend of  macro indicators related to a third party, such as loss ratio, the share of organizations from third party premium, physical damage compensation fund performance, changes in rate of blood money, inflation during the years 2008 to 2013 were studied.

In addition, third party insurance gains and losses of insurance industry over the years 2008 to 2013 and insurance companies separately were studied and analyzed by two new indices (performance index and combined ratio). At the end, the causes of loss of this field of insurance and some recommendations in this regard were presented.

Keywords: Operational Results, Third Party Liability Insurance (Motor), Amendment of Third Party Insurance Law, Performance Index, Combined Ratio

Evaluation and Comparison of the Ratio of Premiums to Equity in Domestic and Foreign Insurance Companies

Coordinator: Insurance Economics and Financial Research Group


The fulfillment of commitments to the policyholders is of the main concerns of policyholders and insurance supervisory authorities. For this purpose, supervisory bodies of any country with laws and regulations, and managers of insurance companies by taking precautions and new technical and financial solutions are trying to maintain financial strength of insurance companies at an acceptable level. One of these cases is the use of appropriate financial mechanisms. In fact, the use of financial mechanisms promotes the financial evaluation ability of insurance companies and consequently increases the level of trust of policyholders to insurance companies.

In this regard, various indicators are developed and used to assess the ability to meet the obligations of insurance companies. One of these standards is the solvency II that is the latest version of the evaluation system in European countries. In Iran, solvency index in the insurance industry are announced by the Central Insurance of I.R. (Insurance Regulatory and Supervisory Authority). The aim of this report is to answer the question whether it is possible to use other indices such production premium proportion to the registered capital or equity as a measure of activity to meet obligations. The results in this area show that in comparison between domestic and foreign firms, production to equity and to capital premium ratios, there was no significant difference between domestic and foreign firms. Today, using models based on constant ratios such as premium of production to registered capital or equity is not recommended in the insurance industry.

Keywords: Ratio of Premiums to Equity, Solvency Index, Domestic and Foreign Firms.

Inefficient Rates Currency in Iran Insurance Market: Causes and Impacts

Coordinator: Insurance Economics and Financial Research Group


The insurance industry is one of the most important parts of the financial market. The distinctive feature of the insurance activities compared with other sectors of the economy is more than ever the importance of the supervisory authority. Releasing the insurance market in 2010 in Iran caused rates to change from a tariff-based to a rather pricing-based system. In this situation, many companies terminated the contract having non-technical or less than current insurance risk rates. This act makes the companies claim paying inability in addition to undermining the principles of fair competition and the principles of professional insurance. Therefore, the issue of non-technical rates on the market requires careful study. Accordingly, the aim of this study is to examine this issue in the insurance market and recommend some solutions at the end. Among the solutions presented in this study are to organize the official actuarial society, integration of weaker companies, to support the structure of the risk assessment in the insurance industry, to observe professional ethics and try to include them in relevant laws and regulations, privatization of insurance companies in one or more fields of insurance, ranking the insurance companies by independent rating agencies. 

Keywords:  Inefficient Rates, Financial Market, Insurance Companies

Risk Factors and Effective components in Calculating Auto Insurance Premiums

Author:  Azadeh Bahador

Coordinator: Property and Casualty (Non-life) Insurance Research Group


This research aims to provide advice to insurers and a thorough study on risk factors and components affecting fire insurance premiums. Basically, in Iran, the two main factors that go into determining auto insurance rates are car features and the use of car which yet need to be modified. In spite of the significant role of individual characteristics, they are not contributed to risk assessment.

We have identified and derived risk factors and components affecting auto insurance premium based on theoretical frameworks and the experience of 19 different countries in the world namely USA, Canada, Switzerland, Germany, France, Spain, Denmark, UK, Italy, Belgium, Finland, Austria, the Netherlands, Ireland, Norway, Greece, Luxembourg, Portugal and Sweden .These factors are categorized into three major groups  as follows:

  • Drivers’ characteristics, car features and the use of car.
  • As premiums are determined by the government and due to existing executive, operational and cultural obstacles in the country, it is not practical to employ all factors identified in this study. 

Therefore, it is recommended to consider the most possible factors in calculating the premium for the sake of fair rates.

Keywords: Risk Factor, Auto Insurance, Premium, Driver Characteristic, Car Feature

Study of Risk Factors and Effective components on Calculating Fire Insurance Premiums

Author: Azadeh Bahador

Coordinator: Property and Casualty (Non-life) Insurance Research Group


This research aims to provide advice to insurers and a thorough study on risk factors and components affecting fire insurance premiums. We have identified and derived risk factors and components affecting fire insurance premiums based on theoretical frameworks and the experience of 10 different countries in the world namely USA, Canada, UK, Germany, France, Italy, Turkey, Japan, India and UAE. These factors are categorized into ten major groups as follows:

Building Attributes, machinery, industrial and manufacturing activities, installations, flammable liquids, tanks of flammable liquids, risk management, equipment and facility safety, warehouses and past loss records.

The Practical solution of the research is the use of initial inspection forms of fire insurance in residential buildings, warehouses, industrial and non-industrial centers.

Keywords: Risk Factor, Fire Insurance, Premium, Building Attributes, Machinery, Installations, Equipment Safety, Facility Safety, Loss Records

Risk Factors and Effective Components in Calculating Cargo Insurance Premiums

Author: Zahra Bardal

Coordinator: Property and Casualty (Non-life) Insurance Research Group


Cargo insurance is among the oldest types of insurance. Since transportation industry faces different risks threatening the delivery of goods, it is essential to consider cargo insurance. In this study, we identified factors affecting rating in cargo insurance by collecting and analyzing experimental data from 9 countries including United States, Switzerland, England, Australia, Singapore, Maldives, China, Japan, India and investigated theoretical frameworks  and clauses Total Loss, C, B, A.

The risks were grouped into four sections: (1) risks associated with vehicles, (2) risks associated with the loads (3) risks associated with human factors and (4) other factors, according to information obtained from five consultation proposal forms (ideal, import-export, external applicable, internal applicable and the translation of two forms of ideal and applicable import – export into English).

In this project, the four proposal forms (ideal, applicable and the translation of two forms of ideal and applicable into English) were designed exclusively in this project.

This form was designed to provide insurers with information so that they can make a left decision to accept or reject a risk and obtain a fair premium.

Keywords: Risk Factor, Premium, Cargo Insurance, Transportation Industry

Consulting Rates for Iranian Commercial Insurance, 2014, Volume 1: Property and Liability Insurance

Authors: Dr Alireza Daghighi Asli, Dr Ahmad Reza Ansari, Azadeh Bahador, Azin Sadat Ostadramezan, Fatemeh Atatalab, Zahra Bardal

Coordinator: Property and Casualty (Non-life) Insurance Research Group


In this study we propose consulting rates by exploiting code of practice and resolutions of supreme council of insurance, market information, comments of experts and practitioners, calculations and experience of other countries in rate-making/insurance pricing. This helps companies, active in the insurance industry use the consulting rates to receive more equitable premiums from their customers while taking into account their interest. 

In addition to considering and evaluating existing literature and past experience, in order to systematize consulting rates the Insurance Research Center (IRC)  has taken major steps some of which are employed in rate-making/insurance pricing for the first time. Among all the aforementioned steps, the most important ones, in different fields, are listed as follows:

Fire Insurance and Consequential Risks: different regions were reduced from 5 seismic risk categories to 4 and this classification is based on the last Iranian seismology studies and scientific research findings. Risk categories in fire insurance were increased from 9 to 12 categories. The seismic risk category was increased from 236 to 429 townships according to the last administrative divisions of Iran. In this consulting rate, for the first time, the islands in Persian Gulf, in addition to mainland, were considered as a risk category. Number of consequential risks and relevant rates were increased from 11 to 24.   

Cargo Insurance: in cargo section, the risks were classified based upon the mode of transportation including aerial, terrestrial, railroad and marine as well as risk category and coverage types of closes A, B, and C, while in the past, this classification was based on W.A conditions and the rates were declared only for marine transportation and adjusted regarding other modes of transportation. In cargo section, for the first time, the rate was declared for numerous goods.

Auto Insurance – Collision: in discount section, new vocational groups were added. Some automobiles, to which no rates were assigned in the past, were added to the list. Franchise was declared in table with different rates separated by all types of automobile and motorcycle. This is different from the past in which franchise has been simply declared 10% for all items.

Auto Insurance -Third Party Liability (Compulsory Third Party Insurance): in this section the increase of financial commitments up to 10 percent of loss of life commitments was proposed due to low coverage in the financial section and financial excess provided by all insurance companies.

Voluntary Third Party Motor Insurance (Excess): different discounts were proposed in financial and loss of life excess coverages with regard to the level of insurance companies' loss.

Medical Professional Liability Insurance: the medical professional liability was extended to all available medical specialties which some of them were missed in past rates. The discount categories were increased based on the insured loss records. 

Paramedical Professional Liability Insurance: the paramedical professional liability was extended to all available disciplines in this field and the rate is assigned to each one for them.

Export Credit Insurance: economic – political risk table of the countries were studied based on the last developments in the world and consequently some countries were added and the risk category of many countries was changed.

Keywords: Consulting Rating, Fire Insurance, Cargo Insurance, Auto Insurance, Medical Professional Liability Insurance, Paramedical Professional Liability Insurance, Export Credit Insurance

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