While the Iranian insurance market is reasonably developed based on regional standards, there is still significant potential for growth, especially in life segment and most non-compulsory non-life lines, according to BMI (Business Monitor International).
Hence, the lifting of trade sanctions should act as a spur to the growth in economy, leading to rise in household disposable income levels and its consequent positive impact on the segment’s growth, considering low insurance penetration of just 1.9%, at home, over 2014/15, when the international average standing at 6.2%.
According to Munich Re Group, a reinsurance company based in Germany, market size of insurance industry in Iran is estimated to be more than USD9bn. For the period up to 2025, premium income is expected to grow by between 5% and 6% per year on average, after adjustment for inflation, yielding a premium volume equivalent to US$ 19bn, according to this giant world reinsurer.
Iran is considered a big market for foreign insurers as they can enter into joint venture contracts with their Iranian counterparts to access an 80 million population, when insurance premium per capita being meagerly USD 94 over 2014/15 in this country, compared to its average USD 662 worldwide.
The insurance market of Iran is categorized into life and essentially non-life insurance. None-life insurance is classified into thirteen segments, which include motor third party liability, health, motor property damage, liability, fire, accident, engineering, cargo/marine, oil and energy, aviation, credit, hull and others.
In this classification, compulsory motorists’ third party(TPL) with 42.2% and health with 19.7% of written premiums were largest lines of non-life insurance, while life insurance constituted merely %11 of the total insurance premiums over 2014/15. The growth of life insurance penetration rate from just %0.09 to %0.20 over 2009 to 2014 indicates the potential of investing in this market.
Nonetheless, life insurance is at an embryonic stage of its lifecycle and lack of awareness of the life insurance benefits among the general public has deterred life insurers from extending their market share of total premiums.
According to one member of the strategic council of Iran’s life insurance, the share of life insurance from the entire insurance portfolio, based on international reports, is more than 55% while life insurance stake in Iran’s insurance market is more or less about 10%. Needless to say, this is good news for new entrants and offshore investors to expand the market and activate its dormant potential thoroughly among insurance seekers.
According to Bimeh Markazi Iran, dubbed as Central Insurance of IR Iran Company(CII) in English, the insurance industry of Iran accounted for only 0.15% of the total premiums, generated in the global insurance market over 2014/15. The insurance premiums, underwritten in the country, have increased robustly in the last five years from USD 5.7 bn over 2010/11 to USD 7.3 bn over 2014/15, registering a CAGR of 28% between 2010/11-2014/15 time period.
In the medium-term, Middle East and North Africa(MENA) region’s life insurance market should benefit from an improving economic outlook, increasing insurance awareness, a high proportion of working-age population and rising affluence, according to the 2013 global report published by Sigma publication, belonging to a leading global reinsure, called Swiss Reinsurance Company Ltd.
Iran’s insurance market ranked 42 in the world in terms of the value of total premiums. The private sector, however, generated % 59.3 of the total. The only state-run insurance company in the country is CII (Central Insurance of IR Iran), which also acts as sole regulator, setting policies for the sector.
With USD 94 written premiums per capita, insurance industry constituted a bit more than 2% of Iran’s GDP over 2014/15. Generally, non-life segment has reached sustained growth in the last several years. However, basic motor and health lines forecasted to enjoy steady year-on-year growth in this segment.
According to the statistics, published by BMI, Iran’s population consists of about 41 million man and 40 million woman. The 17.5% of Iranian population is between ages 15 to 25 and 46% is between25 to 54. The median age of an Iranian man is 28 and for woman is 28.6. Accordingly, Iranians are in good position to offer the new life insurance schemes to them as the population is somehow young.
Regarding the published statistics from the Iran’s Ministry of Health and Medical Education, Iran’s infant mortality per 1,000 live births is approximately 13.8 versus the world standard being 12, according to data delivered by the ministry. This index will fall and rate of mortality will come down to 7 per 1,000 births during the implementation of 6th Development Plan (2016-2021) in the country. Hence, level of babies’ death in Iran, based on the medical developments, will be on the decline, accordingly.
In terms of education, more than 3.68% of GDP is allocated to education and based on the figures posted by Statistical Center of Iran (SCR) on its designated website, more than 88.4% of men and 81.1% of Iranian women can read and write, and more than 84% of Iranians are educated according to the same source.
That said, it is obvious that international players in the life insurance fields would face a population who are young, educated, enjoying high security, exposed to decreasing percentages of unemployment in future–due to recent reopening in international relations – and when this is combined with significant developments in different insurance segments in the country such as in medicine, engineering, and the like, it can be construed that there is a promising future for the expansion of insurance market and most specifically life insurance in Iran.