Government weighing possibility of floating auto insurance premiums

AMMAN — The government is still studying the possibility of floating auto insurance premiums as insurers struggle with financial losses they blame on "low" fixed prices of compulsory third party liability (TPL). 

A source at the Ministry of Industry and Trade, who preferred to be unnamed, told The Jordan Times on Monday that the ministry will "soon" decide on whether to float prices or keep them fixed.  

The Jordan Insurance Federation (JIF) wants TPL prices linked to inflation rate, a step that is expected to increase TPL prices by 20 per cent, JIF President Othman Bdeir told The Jordan Times. 

The federation has been demanding liberalisation of prices for over three years and it reached an agreement with the government on full liberalisation of the insurance service in 2013, a decision that was supposed to go into effect in 2014, but it did not.

Bdeir said the current fixed price of JD93 has remained unchanged for the past seven years, noting that insurance companies get JD75 of the amount after the deduction of taxations and tariffs.

Insurance compensations have increased due to higher prices of cars' spare parts, according to Bdeir, who also mentioned a rise in the number of staff employed by insurance firms besides higher salaries.

Over the past two years, three insurance firms have quit the market and other three have stopped offering car insurance services due to continuous losses, he said, expecting more companies to follow the same steps if TPL prices do not increase.

"When insurance firms quit the market, they do not pay compensations for their clients, an issue the federation cannot solve," he said on Monday, adding that insurance firms lose around JD10 million annually due to TPL insurance. 

An open market for insurance services will encourage competition and will, on the other hand, limit the "very large" number of insurance companies in Jordan, which now stands at 21, and improve their services.