What Should You Know About Surplus Distribution
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What Should You Know About Surplus Distribution

There’s a rare bit of good news for every policyholder in Saudi Arabia: Your insurance company may actually owe you money! That’s right. If you bought comprehensive or TPL car insurance previously, the odds are pretty good that you are due a rebate. In insurance terms, this “rebate” is called surplus distribution. According to SAMA, insurance companies must send rebates, if they take in more money than they need to pay claims and cover operating expenses.

Policyholders can choose to transfer the surplus amount to their bank accounts or use it as an outstanding balance for cheaper insurance renewal. In this article, we’ll explain where surplus comes from, determine who is eligible to receive it, and how to get your share.

Let’s get into the details!

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What Does Surplus Mean in Insurance?

According to economy, a budget surplus ocssurs when a company spends less money than it takes in. In insurance, surplus is the gap between the price that policyholder pay to cover their cars —based on their risk—and the price insurers actually pay for covering their claims. A surplus is actually an indication of a company’s wellbeing and excellent financial management.

When Does a Surplus Occur?

At its most basic level, an insurance company will be in surplus budget when the income (premimums) is greater than the expenditure in the same time frame, such as the finincal year.

Typically, insurance company collects enough money to cover everyone. Let’s assume that a company collects an amount of 10 million riyals from policyholders during the year; insurers will use this money to pay claims and cover other operation expenses. So, suppose, that in this year the insurance compay receives less claims than expected; because of that the company will only have to pay 5 millions riyal to cover claims.Obviously, this will leave the company with a surplus of 5 million riyals. Eventually, the insurance company will have to distubute this surplus among the policyholders.

Surplus Distribution Eligibility

As per SAMA’s Surplus Distribution Policy instructions, every policyholder is eligible to get 10% of the net surplus from the insurance operations, provided that:

  • They had a valid insurance policy during the surplus year. Bear in mind, that insurers will exclude expired or canceled insurance policies. This also applies to insurance policies that are canceled after transferring vehicle ownership.
  •  Policyholder’s claims during the surplus year should be less than 70% of their insurance premiums.
  • There shall be no pending dues in favor of the insurance company on the policyholder’s account. In case of pending payments, the insurance company will deduct your surplus share to settle the amount first.

Each insurance company must announce surplus distribution and it shall notify eligible customers through SMS. So, be alert to any message you get from your insurer and keep your contact information updated!

It’s also worth checking to see whether your previous insurance owes you money from the past. Here’s how to do it if you need to validate your eligibility for previous years. Google your insurance company name + Surplus Distribution; most insurers will have a page where you can check by entering your national ID / Iqama number.

What happens to the surplus amount?

As explained, any remaining amounts from insurance premiums belong to the policyholders. Mainly, insurance companies use 3 methods to distribute the amount of insurance surplus, as follows:

  • Through a direct bank transfer to the policyholder’s account.
  • Use the surplus as a rebate on car insurance renewal.
  • Keep it in the policyholder’s account as an outstanding balance. Additionally, the policyholder can authorize the company to donate the amount to accredited charities.

Please note that you have the right to claim the insurance surplus within 10 years of its announcement.

In conclusion, if you ever feel low on cash, spend some time searching for your unclaimed money! And the next time you buy insurance, be sure to compare car insurance rates for companies that have managed to run a surplus in the past years; Because the surplus is an excellent indicator of claims management in insurance companies. Plus, if you think about it, a company that can generate a surplus for several years can help you save on what you pay; The more efficient the company is in paying claims and covering operational costs, the lower the insurance prices will be!