The Insurance Authority reveals the criteria for determining car insurance prices

Amid ongoing inquiries from policyholders regarding fluctuating car insurance prices in Saudi Arabia, the Insurance Authority has issued a comprehensive clarification outlining the precise criteria governing the pricing of vehicle insurance policies. This clarification comes in response to feedback from some citizens and residents who felt that insurance prices and deductibles had become excessive, leading them to question the economic viability of comprehensive insurance.

General context and development of the insurance sector in Saudi Arabia

The insurance sector in Saudi Arabia has undergone radical transformations in recent years, culminating in the establishment of the Insurance Authority as an independent government body responsible for regulating and developing this vital sector. Since its inception, the Authority has aimed to protect the rights of policyholders, enhance market stability, and ensure the application of best international practices. Clarifying pricing factors is part of a broader strategy to promote transparency and eliminate arbitrariness in determining insurance premiums, aligning with the objectives of the Financial Sector Development Program within Saudi Vision 2030.

Personal criteria of the insured

The authority confirmed that car insurance prices are not determined arbitrarily, but are subject to a thorough actuarial study based on risk assessment. Among the most prominent personal factors affecting the price are:

• Age and marital status: The driver's age and marital status are important indicators for assessing the level of caution while driving.
• Number of children: The number of children under the age of 16 is taken into account, as studies indicate that drivers with children are often more compliant with traffic safety rules.
• Educational level and profession: Occupation and educational level play a role in determining the pattern of vehicle use.
• Traffic record: The driver's history in terms of accidents and violations, and the number of years he has held a driver's license.
• National address: Geographical range and workplace affect the likelihood of exposure to accidents or congestion.

Vehicle specifications and document details

Besides driver data, the vehicle itself plays a pivotal role in determining the final cost. These factors include the manufacturer, vehicle model, year of manufacture, and its market or insured value. Also considered are the type of vehicle used (personal or commercial), the type of transmission, where it is parked overnight (in a garage or on the street), and any significant modifications made to it.

Regarding the insurance policy, the type of coverage (comprehensive or third-party) determines the base price. In addition, there is the deductible for comprehensive insurance, repair options (at an authorized dealership or independent workshops), the expected annual mileage in kilometers, and the geographical coverage area.

The expected impact of applying these standards

At the local level , this transparency in insurance policy pricing contributes to a healthy competitive environment among insurance companies, ultimately benefiting the end consumer. It also encourages drivers to adhere to safe driving practices in order to receive discounts and maintain clean driving records, thus reducing traffic accident rates.

At the regional and international levels , the Saudi Insurance Authority's adoption of these rigorous actuarial standards places the Saudi market among the world's leading markets. This high level of transparency and governance enhances the confidence of foreign investors and makes the Saudi insurance sector an attractive destination for international investments and partnerships, thus supporting the national economy as a whole.

In conclusion, the Insurance Authority affirms that the ultimate goal of these guidelines is to achieve fair pricing that accurately reflects the level of risk associated with each individual and vehicle. This approach ensures a sustainable balance in the contractual relationship between insurance companies and beneficiaries, and reinforces the principles of transparency and fairness in calculating premiums and deductibles.