Afghanistan’s insurance industry struggles ... but terrorism claims are paid out
KABUL: The insurance sector in Afghanistan, like many other sectors in the country, is gasping for much-needed reforms.
Although there are insurance services available in the country, absence of proper government policy, high insurance premiums, lack of awareness among people and mistrust of the insurance companies have left this sector underdeveloped.
The Afghan Chamber of Commerce and Industry identifies areas of health, motor, cargo and mining as high potential areas for insurance companies but in a country marred by decades of conflict, rife graft, poor economy, and sectarian divide, the highest-risk factor is terrorism.
The Afghan Global Insurance (AGI) offers a long list of insured items and, contrary to many countries, it also pays its clients’ claims for acts of “terrorism” that include bomb blasts, suicide attacks, and air strikes, which have become a frequent occurrence in Afghanistan.
Since its establishment in 2010, the AGI has managed to absorb only a little over 40,000 clients — among them foreign firms, aid agencies and expatriates.
AGI is re-insured by international firms to which it cedes major projects to reduce the risk, Naweedullah Gulzad, chief operations officer at the firm, told Arab News. These firms include Lloyd’s of London and the Indian-based General Insurance Company.
The government has withheld for years the draft legislation on insurance despite running a national insurance firm of its own that mainly deals with covering car accidents and arson.
Gulzad said the absence of an insurance law was the main hurdle for promotion of the industry in Afghanistan. “The other challenge has been lack of awareness among people and the public distrust. Most people think insurance may actually rob them,” he added.
Lack of awareness, mistrust, political instability among other factors, have prompted many companies registered in Afghanistan to buy insurance directly from outside the country, which is a distraction for the Afghan economy and is contrary to the law, he said.
Still, recently, there has been good news for the AGI in the health sector as most NGOs have expressed interest in health insurance for their employees. One insurance sector that perhaps makes AGI more attractive to clients and is not common in many other parts of the world is covering “terrorism and political violence.”
“We have an insurance policy by the name of terrorism and political violence ... airstrikes, even passive war is covered under that … and if anything happens to your car in a terrorist attack, insurance companies are paying that,” Gulzad said.
As an example, he added, the AGI paid more than $900,000 to one of the Indian companies in Ghazni province, where the power transmission line was damaged in a Taliban attack.