Kurdistan to be insured

Recognizing the threat to the Region?s economy and development, the KRG works to reestablish private sector insurance activities.

Swara Mohammed bought a new car two months ago and had an accident on August 19. He nervously said that he hasn?t yet settled payment for the car. ?I have collected money for the past year and borrowed some more to buy this car,? said Mohammed as collected the broken car parts. ?I don?t know whether to pay back my debts or repair my car.?

No vehicles in Kurdistan Region are insured against accidents, and the owners are at 100% risk and have to bear the complete responsibility for any accidents or damages that occur to the vehicles as a result.

But it?s not only vehicles--almost nothing in this region is insured, and insurance is an almost dead system in Kurdistan. People take the responsibility for all their belongings by themselves and live on risk at all levels of their lives. Lack of insurance continuously causes serious damage to the economy and hinders development.

After the second Gulf War, the withdrawal of the Central Government from Kurdistan Region, and the establishment of the de facto autonomy in the early 1990s, the insurance sector--controlled by a state-owned insurance company--and all insurance activities in the region were paralyzed.

Understanding and recognizing the significance of insurance and the threats its absence creates to the economy, the Kurdistan Regional Government (KRG), in cooperation with the private sector, is working to reactivate and revitalize the insurance sector.

According to Rashid Tahir, Deputy Minister of Finance, Kurdistan Parliament has decreed a new law in the Ministry of Finance after the reemergence of both Ministry of Finance and State Ministry of Finance recently. According to the new law, the Ministry, now united, has 10 general directorates--one of which is the National Insurance Company, which has a board of directors and a capital equal to 3 billion Iraqi dinars.

?We have also licensed some three private sector insurance companies, according to the Ministry?s regulations and standards, to provide insurance and reinsurance services in the region,? said Tahir in and exclusive interview with the ?Globe? on Wednesday, August 25. ?We do not want the public sector to do all insurance activities alone; we want to give a significant role to the private sector, while the public sector will still be overseeing and controlling the private sector?s activities.? Tahir says that the government will be auditing the private insurance and reinsurance companies, and ensure they?re abiding by laws and regulations.

Nawzad Amjad Rafiq, general manager of Star Insurance Company, one of the three licensed private sector insurance companies, believes that transferring the responsibility to the private sector is a very wise decision because the private sector is more cost-effective and efficient due to less bureaucracy and routine work compared to the public sector. ?A private company can reimburse a customer in a few days, while the same issue could take six months in a public company,? said Rafiq in a ?Globe? interview.

According to Tahir, while the public is free to decide whether to use the state insurance company or private companies for their insurance needs, there is some obligatory insurance that has to be done with the government, such as the third-party liability insurance for vehicles.

?Currently, the Central Government has this insurance for all vehicles in the country except Kurdistan Region,? Tahir told the ?Globe.? ?They charge the car owners by increasing the cost of fuel by a specific rate. We are trying to implement the same policy in Kurdistan. We are also trying to make government projects? insurance an obligatory one on the contractors.? Other insurance, Tahir states, like life, engineering, medical, fire, or theft can be purchased from either the national company or a private licensed company.

According to Rafiq, Star Insurance Company, the first local insurance company in Kurdistan, currently provides insurance for mortgages and marriage loans taken from the government, and is trying, in cooperation with the KRG, to provide other insurance policies such as car insurance.

As an effort to revitalize the insurance sector in the region, the Ministry of Finance and Star Insurance Company provided a training course for the staff of the national insurance company to enable them to run the insurance company at the beginning of the process.

Rafiq, who is an insurance expert, gave the initial training to some 25 employees of the insurance company. ?The foundation is very important for the insurance sector, and hence we need to train the insurance sector employees very well right from the beginning. We used to send employees with little qualifications to the insurance company, but now we are reversing the process and send very qualified people to reestablish this company,? stated Tahir.

Both Tahir and Rafiq admit that their mission is not an easy one, and they have serious challenges on the way toward a well-functioning insurance sector in Kurdistan. Public awareness is the biggest challenge, stated Rafiq. ?Our people still don?t know the significance of insurance in their lives. We need hard work and strategic planning and powerful campaigns to show people that insurance is a guarantee for their lives and belongings. Insurance means avoiding risk.?

Tahir also agrees with that, and believes that they need to work hard on that issue. ?If someone has invested all his capital in a small shop without insurance, it could disappear in a second by a small fire or accident; but with insurance, he can get back some 60-70% of his capital, which is very good.?

Another challenge is the opinion of some Islamic clerics that insurance is taboo due to the fact that you never know what is happening and yet you still pay someone, and that one may only trust God to insure and protect one?s life and assets.

?This has a significant influence here, and even some Parliament members support that idea, which hurts the insurance sector, the public, and the economy as a whole. Insurance is like a guard to your belongings, and is a key to growth and economic development,? Rafiq says.

Tahir says that insurance is a key to attracting foreign businesses and investors, because ?the first thing a foreign country requires to work in another country is its banking system, and the second point of their interest is insurance. An investor would not make big investments without having the confidence that his capital is away from risk.

According to Rafiq, the region?s investment law contains an article that harms the local insurance sector. ?An article in the investment law states that foreign investors have to insure their projects with a local or international insurance broker,? he explained. ?This encourages foreign companies to use international insurance companies rather than local companies, which endangers the development of the local insurance sector. Our authorities had to oblige foreign companies to insure their projects in Kurdistan with a local insurance company to avoid the outflow of capital for insurance payments to foreign insurance companies.?

Tahir, on the other hand, says that foreign and local businesses are only allowed to work with insurance companies whose offices or branches are registered in the region, and that currently no international insurance company has a registered branch in Kurdistan, which has to mean that all foreign businesses must purchase insurance policies from local insurance brokers, something that is currently not the case.