The History of Car Insurance in Saudi Arabia
Although car insurance has recently become compulsory in Saudi Arabia. Arabs had a great understanding of insurance a long time ago. As a matter of fact, Arab merchants practiced insurance in the winter and summer trade. Discover more about the history of the insurance industry in Saudi Arabia and the evolution of insurance over the years.
What is Insurance?
Linguistically, insurance derives from assurance which means safe, secure, undoubted. In other words, insurance means to pledge to provide protection and security.
As for commercial sense, it is an agreement between two parties whereby the First Party (the insurer) undertakes to pay compensation for specified in return for payment of a specified premium from the Second Party (the insured).
A History of Insurance
The history of insurance dates back to ancient civilazations. In fact, the concept of insurance can be traced back to the times of Prophet Yusuf (AS). Prophet Yusuf aimed to reduce the possibility of loss, by preparing the land for the 7 years of famine, which would follow the 7 years of plenty.
Moreover, Ibn Khaldun mentions in his books that the Arabs have practiced the concept of insurance in the archaic period. During the winter and summer trade, Mecca merchants established a union to pay compensation from their trade profits to those who lost a camel or goods along the route. This system is not different from the cooperative insurance system that we know today, because ensuring camels is similar to vehicle insurance.
Similarly, Western societies have known older forms of insurance like marine insurance. Formerly, European Merchants developed coverage to safeguard their ships against risks. From there onwards, the coverage developed and expanded to include the insurance practices we know today
Officially, the insurance industry in Saudi began in the seventies through branches of foreign insurance companies.
Today, insurance in Saudi Arabia is one of the most important components of the financial services sector in the Kingdom and the fastest growing industry.
Car Insurance Boom in Saudi Arabia
Thanks to The Saudi Central Bank (SAMA) regulations and Vision 2030 insurance sector in Saudi witnessed rapid growth during the past years. In particular, these regulations and decisions helped many understand the importance of having car insurance; because it’s the only safeguard cars, reduce civil liability, among many other reasons to have vehicle insurance.
Primarily, SAMA was founded in 2003 to supervise licensed car insurance companies in Saudi. The bank is also responsible for regulating and developing the insurance sector, its aims to:
- Developing insurance products with transparency and efficiency
- Increasing competition between licensed insurance companies in terms of price – compare car insurance prices online in Saudi!
- Expanding outreach to the customer
In 2018, the Saudi Arabian Monetary Agency (SAMA) updated compulsory vehicle insurance to cover more drivers. In contrary to previous practice, now it covers licensed drivers aged 18 years and above.
On the other hand, Traffic Department made having valid car insurance a requirement for the vehicle’s registration renewal. Accordingly, many rushed to search for the best insurance offers and compare insurance rates in Saudi.
Car Insurance Digital Transformation in Saudi
Currently, the Kingodm is implementing a transformative vision to centralize and connects all government sectors online; making Saudi leading in the globe of e-services. Thus, Saudi Arabia is constantly expanding its digital services to facilitate and ease governmental services for Saudi nationals and resident expatriates, such as Absher & Najm
In consequence, digital transformation took Saudi car insurance companies to the next level. In order to keep up with the pace, many insurance providers started:
- Showcasing insurance products online
- Selling car insurance online in Saudi
- Filing and processing insurance claims online
In line with this, trusted comparision platforms have emerged that enable everyone to compare car insurance prices online in Saudi Arabia.