Insurance companies have set up offices, but growth has been hampered by administrative corruption and neglect, according to officials and experts.
Insurance companies have set up offices, but growth has been hampered by administrative corruption and neglect, according to officials and experts.Insurance was once a thriving industry in Afghanistan. Years of war hollowed out the economy and those who could afford to fled the country.
Since 2001, the government and international community have been trying to revive the economy, pumping in millions of dollars.
“Corruption is the main obstacle for the growth of an insurance culture,” says Ahmad Kawooz Jahesh, executive director of the private Afghan Global Insurance Company. He cites the example of the motor vehicles crowding Kabul’s roads. “There are tens of thousands of cars but none of them has real insurance.” He adds that a weak enforcement system and failure to punish defaulters have meant that individuals can bribe officials to claim fake “insurance” costs.
The system works this way, he explains. Vehicle owners purposely damage their vehicles to claim insurance by bribing inspectors and the police, a practice that is no good for insurance companies, he says. “If you have insured 100 cars and 90 are willfully damaged, and false claims are submitted, the insurance company has to pay the claim, which is bad in business,” Ahmad Jahesh says. “If we want to give health insurance we will have the same problem,” he adds. “We have to screen applicants before giving insurance.”
Fazal Bari Mumtaz, director of the Directorate of Insurance, Ministry of Finance, acknowledges there is widespread administrative corruption in insurance and blames it on “inattention” of the Ministry of Finance. According to him, the ministry’s indifference has been a major hurdle in the growth of the industry. Mumtaz says the Ministry of Finance has neglected insurance because it is “not an income bringing sector and they were paying attention to sectors which were income sources”.
Shaky system
Khan Jan Alokozai, the first deputy of Chamber of Commerce and Industry in Afghanistan, says a weak insurance system has led to the flight of both external and internal capital. Foreign investors have shied from investing without insurance coverage, according to the directorate of insurance.
The state-owned Afghan National Insurance Company (ANIC) delivers health and vehicle insurance services. There are complaints that it does not settle claims by insurance policy holders. Ahmad Waheed, Kabul resident, says his car is insured by the company but they have not paid any of his claims.
Director Mumtaz confirms the allegation. “For years people have been paying premium to the ANIC for car insurance but the company has not paid up when damages have happened.”
He does not buy the company’s claim that the claims have not been properly processed. “We all know that Afghanistan doesn’t have a proper traffic system to investigate the case and decide the culprit,” he says. He is very critical of the nonchalant attitude of officials in the ANIC, and says their behaviour is a “problem”.
Economist Sayed Masood of the University of Kabul thinks the Ministry of Finance could sort out the problem if it wishes to. “The ANIC belongs to the ministry. The ministry is part of the government. If the government wants the insurance company to work it could pump in money to make it (insurance) a great movement.” Killid tried repeatedly to interview officials in the ANIC but they were unwilling.
Call for reform
Officials in the directorate of insurance say they are working to reform the ANIC. “A charter of health insurance has been prepared, and will be soon released to the public. Bank debts insurance has been made compulsory. Construction companies will soon be made compulsory,” says Mumtaz. He adds that most employees of security companies, cargo and airlines are covered by insurance. “We have a plan to sign a memorandum of understanding with an Indian institute for the growth of insurance, and also an Iranian company.”
The vacuum in the insurance sector, and lax rules, has helped foreign firms who deal directly with customers in Afghanistan. Jahesh, executive director of Afghan Global Insurance Company, says, “In Afghanistan, the lack of insurance companies has meant the companies purchase insurance directly from external countries, which is illegal.”
Adrian Henry, the marketing director of Afghan Private Insurance Company confirms this has caused capital to escape from Afghanistan.
“Most companies purchase the insurance from insurance companies in the US, England and Europe. In this case the income of Afghanistan which has a role in the development of the country goes out of the country and companies that use this type of insurance don’t help the economy of the country whereas the licensed Afghan companies have to pay its tax and the tax of their staff.”
Meanwhile, Mumtaz in the directorate says the Ministry of Finance has been taking action and fining some of the foreign insurance companies but not with great results. In most cases, he admits, the ministry is up against the “issue of influence of powerful people … some of the companies are very powerful. They purchase the insurance from other countries and have links with influential individuals (in the government).”
