1- What is the role of the Insurance Supervision Department of SAMA?
The Law On Supervision of Cooperative Insurance Companies, promulgated by Royal Decree (M/32) dated 02/06/1424H, has entrusted SAMA with the regulation and supervision of the insurance market in Saudi Arabia. To achieve this task, SAMA has setup a dedicated department, the Insurance Supervision Department.
2- Where can information about the insurance sector be found?
The main source of information about the insurance market in Saudi Arabia is SAMA. As such, all information available about insurance in the Kingdom can be found on SAMA’s website, specifically, under the “Publications” section.
3- What is the purpose of cooperative insurance?
The purpose of cooperative insurance is securing protection for subscribers against future and unexpected losses, and restoring the financial status of the insured to the state he/she had been in before the occurrence of the loss. This is accomplished through mutual cooperation among insured persons.
4- What is meant by “insurable interest”?
“Insurable Interest” is the legal right of a natural or juristic person to insure an object (e.g., a car). In order to insure an object there should be a verifiable legal relationship between the person and the subject of insurance. An example of legal relationship is “ownership”, e.g., if you own a house or a car, you have the right to insure it, whereas a person may not insure his neighbor’s house, due to the absence of an insurance interest.
5- What is meant by deductible?
“Deductible” refers to the portion to be paid (specified in the insurance contract) by the beneficiary (the insured) in case a policy-covered risk took place. For example, a car accident costing SR 5,000 for repairs, and the deductible as per the policy is SR 1,000, the company shall pay SR 4,000 and the insured shall bear SR 1,000.
6- What is meant by the “insurance coverage limits”?
“Insurance coverage limits” is the maximum limit of the insurance company’s liability as specified in the insurance contract before applying any deductions/charges. For instance, the maximum limit of the insurance company’s liability as specified in the motor insurance policy is five million Saudi riyals for material damages and five million Saudi riyals for physical losses, and any amounts beyond that shall be borne by the insured, not the company.
7- What is the compulsory motor insurance policy?
Compulsory insurance policy covers the damages caused to individuals and property by your vehicle. This policy does not cover the damages afflicting you or your vehicle when driving. For example, when an accident takes place and you are 100% the cause, the insurance company will pay for all the damages made by you, but will not pay you any compensation for damages afflicting you or your vehicle.
8- What is the comprehensive motor insurance policy?
Comprehensive insurance policies covers both the insurance company’s liability for the insured’s car (covers the vehicle against fire, theft, and incidental accidents) and the insured’s liability towards a third party (property and individuals). For example, when two vehicles have an accident, the comprehensive insurance policy covers all damages caused by or afflicted on you. The company shall pay all the costs for repairing your car, repairing and compensating all the damages of the third party that you caused and are responsible for.
The comprehensive motor insurance program can be expanded for an additional premium where it covers the following:
§ Renting an alternative vehicle for the insured while the damaged one is being repaired
§ Roadside assistance service
§ Repairing broken-down vehicle at the dealer or a local garage
9- What are the things that you should pay attention to when purchasing a comprehensive motor insurance policy?
§ Limits of Coverage:
The amount of coverage stated in the policy or the vehicle’s market value at the time of the accident, whichever is lower, represents the insurance company’s maximum liability for compensation. Make sure that you report the actual value of your vehicle to the company when insuring it, and at each renewal of insurance policy without addition or diminution because the insurance policy is a compensation policy not an enrichment one.
§ Percentage of Depreciation:
The idea of depreciation applied to the object subject of insurance refers basically to the principle of compensation which aims at restoring the insured to his same financial position prior to the loss occurrence. This method is used widely by insurance companies as a means to compensate for the actual value of the damage resulting from the covered loss, taking into consideration the presumed lifecycle of depreciated spare parts. Example: if a car had an accident causing it to be totally wrecked after six months of insurance, and it was worth SR 100,000 upon the purchase of the insurance policy, the insurance company will not indemnify the insured for the whole amount, but it shall deduct the amount of depreciation of the car for six months.
§ No Claims Discount (NCD):
Some insurance companies offer the insured (vehicle owner) what is called “no claim discount” by which they reduce the insurance premium for next year due to having a claim-free and accident-free record over the previous insurance year. This is to encourage drivers to avoid traffic accidents. On the other hand, some companies raise the insurance premium for the new insurance year if the insured submitted a claim during the previous year.
10- What are the documents supporting the claim in motor insurance?
All documents proving and supporting the fact that the person insured was driving the vehicle driver when the accident occurred, the insurance coverage validity and the circumstances of the incidence from which the claim resulted. Supporting documents also include the accident report from the traffic police department and any other original documents the company might require, such as:
§ Driving license
§ Vehicle registration card
§ Insurance policy
11- What are the exceptions of an insurance policy?
It is necessary to be aware of the cases where the insurance company is not responsible for indemnifying you for the damage that might be incurred by your car due to an accident. They are included in the policy under “Exceptions” or “Exceptions from the coverage limits” or “General exceptions”. Example:
§ Catastrophe risks
§ Risks resulting from driving a car by a person under the age of 21
12- What are the types of property that can be insured?
Insurable property can be divided into three categories:
§ Buildings: Refers to the structure of the building and its attachments
§ Machinery and other content: Refers to all content that might be inside the buildings or storehouses except for stock
§ Stock: Refers to all items in the custody of the insured whether he owns them or not and the items and goods kept by an organization whether it owns them or not
13- What are the insurance coverage limits of property insurance?
Property insurance coverage includes:
§ The subject of insurance itself whether it is real estate or a movable asset against risks (e.g., fire, theft, pipe crack, natural hazards)
§ Contents of the subject insured
§ Personal liability
§ Legal liability against death cases caused by incidental accidents to property and casualties
§ Rent loss for the landlord due to the real estate’s unsuitability for rent because of a defect or risk covered by insurance according to the insurance policy
§ The cost of an alternative accommodation while the damaged real estate is being fixed
14- What risks are excluded from property insurance?
Property insurance exclusions are:
§ Damages resulting from riots and domestic strikes and disturbance provided that it was not agreed on adding them in the insurance policy
§ Damages ensuing from wars whether declared or undeclared
§ Damages of radioactive contamination whether it is the direct cause or not.
§ Injuries or destruction because of pollution
§ All types of consequential losses
§ Terrorism risks
§ Damages ensuing from maritime risks if their exclusion was clearly stated in the insurance policy
Medical (Health) Insurance
15- What is meant by medical (health) insurance?
Medical (health) insurance refers to insurance policies which cover medical treatment costs, medications, medical and therapeutic services and supplies and management of medical programs.
16- What is meant by the “benefit brought to the insured” in medical insurance?
“Benefit brought to the insured” refers to the costs of providing health services included by the insurance coverage within the limits specified in the insurance contract.
17- What is meant by “base of direct entry” or “in the company's account” in medical insurance?
“Base of direct entry” or “in the company’s account” refers to the facilities of no-payment appointed by the company and available for the insured. All expenses incurred at these facilities are directly debited from the company’s account.
18- What is meant by a “service provider” in medical insurance?
“Service provider” is the person or health facility which is accredited and licensed according to applied regulations to provide medical services in the Kingdom, e.g., hospitals, diagnosis centers, clinics, pharmacies, laboratories and physiotherapy or radiotherapy centers.
19- What is meant by the “service providers' network” in medical insurance?
“Service providers’ network” is a group of health service providers accredited by the Council of Cooperative Health Insurance (CCHI) and specified by the insurance company to provide the service for its policyholders. These service providers will directly debit expenses from the insurance company’s account upon the policyholder presenting a valid insurance card.
20- What are the supporting documents when making a claim in medical insurance?
All documents proving and confirming the age, nationality, identity of the insured as well as the validity of the insurance coverage, the circumstances of the incidence from which the claim resulted and repayment of costs. Supporting documents also include other documents such as: bills, receipts, prescriptions, doctor report, referral and recommendations and any other original documents that might be requested by the company.
21- What diseases and cases that are usually excluded by insurance companies from the medical insurance?
§ Plastic surgery unless the surgery is necessary, e.g., as a result of a defacement ensuing from an accident
§ Chronic diseases suffered prior to entering the current insurance contract such as diabetes
§ Routine medical check-ups such as employment or travel checkup.
§ Steroids and vitamins
22- Does the insured bear part of the medication cost or does the insurance company bear the whole cost?
It depends on the type of policy; some policies do not require the insured to bear any part of the cost while others stipulate paying a specific portion of the costs based on the company’s agreement with the insured. In general, the value of the insurance policy providing full coverage for medical costs is higher than the one that provides partial coverage for medical costs.
Protection and Savings Insurance
23- What is meant by protection and savings insurance?
Protection and savings insurance is a contract by which the insurance company assumes to pay to the insurance beneficiary an amount or amounts including the savings proceeds on a future date in exchange for the insurance premiums paid by the beneficiary.
24- What are the types of protection and savings insurance?
There are several types of protection and savings insurance, such as:
§ Protection insurance: Refers to insurance policies which cover risks related to death, permanent/ temporary and full/ partial disability of individuals or groups
§ Protection and savings insurance: Refers to insurance policies under which the insurance company pays an amount or amounts including the savings proceeds, on a future date, against the premiums paid by the insured
25- What are the prevailing insurance laws and regulations in Saudi Arabia?
In Saudi Arabia, the insurance legal framework is composed of:
§ The Law On Supervision of Cooperative Insurance Companies
§ The Implementing Regulation
§ The topic-specific regulations, e.g.: Market Code of Conduct Regulation, the Risk Management Regulation, the Anti-Fraud Regulation, the Anti-Money Laundering and Combating Terrorism Financing Regulation, etc., and all other circulars and guidance notes issued by SAMA
26- Who defines the regulations about insurance and how?
SAMA defines all topic-specific regulations, circulars and guidance notes about insurance. The definition process contains 3 steps:
§ SAMA identifies the need to define a new regulation
§ SAMA drafts the law and posts it for public consultation on its website (for 20 to 60 days). During that time, professionals and the public are invited to comment on the new regulation
§ SAMA reviews the comments received, updates the regulation and publishes it on its website
27- What is the process to obtain an insurance and/or reinsurance license?
The insurance and/or reinsurance licensing process entails five main steps, namely application submission, file review, Royal decree issuing, IPO and license issuing. The process can take up to 16 months, depending on its content.
Step 1: Application Submission
Step 2: File Review
Step 3: Royal Decree Issuing
Step 4: Initial Public Offering
Step 5: License Issuing
28- What are the required documents to submit when applying for a license?
There are 8 supporting documents to be submitted along with the application for insurance/reinsurance company license or insurance/reinsurance service provider license:
1. Completed license application form
2. Memorandum of association
3. Articles of association
4. Organizational structure/ chart
5. Feasibility study
6. 5 year operation plan to include as a minimum the following
§ Insurance types which the Company intends to practice
§ The ability to entrust or accept re-insurance agreements for the types to be re-insured
§ Product marketing plan
§ Expected costs to commence the activity and necessary financing sources
§ Expected activity growth rates taking into consideration the solvency margin requirements
§ Expected number of staff and Saudi appointment / qualifying plan
§ Annual expenses based on the expected activity growth rates
§ Estimated financial statements linked to growth expectation
§ Statement of the technical basis of the insurance operations and a certificate by an actuary confirming that the basis, advantages and restrictions of insurance operations are sound and enforceable
§ Branch allocation and operation plan
7. Any agreements with other parties
8. Irrevocable Bank guarantee for an amount equal to the required capital in favor of the Agency issued by a local bank and to be renewable automatically until the capital has been paid up in full
29- Can SAMA revoke the license of an insurance or reinsurance company/ a services provider?
Yes, if necessary SAMA can revoke any insurance or reinsurance company or services provider license.
30- What is the process to obtain an insurance services provider’s license?
The insurance and/or reinsurance licensing process entails 4 main steps, namely application submission, file review, commercial registration issuing, and finally license issuing:
Step 1: Application Submission
Step 2: File Review
Step 3: Commercial Registration Issuing from the Ministry of Commerce
Step 4: License Issuing
31- Which companies are licensed to operate in Saudi Arabia?
To obtain the full list of insurance companies licensed to operate in Saudi Arabia, visit the “Licensed Companies” section
32- What is the “File and Use” approval?
There are two types of insurance products approvals namely “File & Use” and permanent approvals:
§ ISD grants the “File & Use”, a form of temporary approval, upon the submission of the complete product approval submission. During the “File and Use” period, ISD reviews the product in order to decide to permanently approve/ decline it. Medical Expenses, Motor, and all Savings and Protection products other than employer sponsored Group Life are explicitly excluded from the “File & Use” process.
§ When SAMA grants a permanent product approval, the insurance company can commercialize the product permanently on the Saudi market.
33- What is the process to get a new insurance product approved by SAMA?
The product approval process entails 3 steps, namely the product approval application submission, application review and finally the product approval/ decline issuing.
Step 1: Product approval application submission
The request should be made to ISD in both soft and hard copy versions and in both Arabic and English language and accompanied by the following documents for approval:
§ The proposal form.
§ The policy wording and endorsement.
§ The policy schedule.
§ The reinsurance treaties.
Step 2: Application review
ISD will contact the insurance company to obtain further documentation and information.
Step 3: Approval/ Decline Issuing
Once the product review is complete, SAMA notifies the company of the product’s permanent approval/ decline.
34- What is the expected timeline for a product to be approved?
There is no specific timeline for a product to be approved. The necessary time to approve a product depends on the type and complexity of the product.
35- What criteria are assessed in order to approve a product?
ISD supervisors verify the compliance of the products with the requirements of the insurance law, the Implementing Regulation and other SAMA regulations.
36- Should all products be approved prior to commercialization?
All insurance products must be approved under either “File & Use” or permanent approval before their commercialization
37- What is the supervision process?
The supervision process of ISD encompasses four supervision activities namely on-going monitoring, compliance assessment, off-site examination and on-site inspection:
§ The on-going monitoring includes the financial supervision which monitors the health of the Saudi insurance market and complaints analysis which assesses insurance companies conduct towards policyholders
§ The compliance analysis assesses the compliance of companies with the insurance law and SAMA’s regulations
§ The off-site examination remotely draws the risk profile of regulated entities
§ The on-site inspection completes the risk profile of regulated entities by conducting a visit to the premises of the company
38- Are all the companies reviewed on a regular basis? And how often does an assessment occur?
All the regulated entities are reviewed on a regular basis by ISD supervisors:
§ The financial strength is monitored throughout the year
§ The off-site examination and compliance analysis are conducted on an annual basis
§ The on-site inspection is performed every one to three years
39- Who performs the supervision of insurance and reinsurance companies?
ISD supervisors perform the supervision of regulated entities. Each supervisor is assigned a regulated entity to supervise. During on-site inspections, the regulated entity should expect to receive in its premises a team of three to six supervisors.
40- What is financial reporting, why is it important?
Financial reporting is the provision of financial information to ISD for review and analysis. Financial analysis allows ISD to monitor the health of the Saudi insurance market.
41- Which companies are required to submit their financials to SAMA? And how often?
Licensed companies are required to submit the following financial returns to SAMA:
§ Quarterly and Annual audited financial statements for SAMA’s approval before publishing
§ Monthly, Quarterly and Annual prudential returns using the financial reporting forms
42- Where can a company obtain the latest version of the financial reporting forms to be submitted to SAMA?
To obtain the latest version of the financial reporting forms, visit the Forms page.
43- What accounting standards are followed by the financial reporting forms?
The financial reporting forms were developed in accordance with the International Accounting Standards (IAS) and the Implementing Regulation of The Law On Supervision of Cooperative Insurance Companies.
44- How fast are insurance/ reinsurance companies and insurance/ reinsurance service providers required to reply to policyholders’ complaints?
The companies and service providers are required to reply to policyholders’ complaints within 15 calendar days from the date of receiving the complaint as per article 45 of the Implementing Regulation.
45- What is the process to file a complaint against an insurance company or service provider?
The plaintiff should contact the general secretariat of the committees for resolution of insurance disputes and violations in order to file a complaint
46- What information should be provided when filing a complaint against an insurance company or service provider?
The plaintiff should explain the circumstance that lead to filing the complaint against company and should provide proof to support his case (if available) along with details on his policy number and contact information.
47- How can I follow-up on my complaint filed at SAMA?
The plaintiff can follow up on his complaint by contacting CRIDV .