The necessity for monitoring insurance companies and the reasons for developing Iranian accounting standard No. 28

Abstract

Nowadays, it is essential for Iranian insurance companies to provide monthly online reports on the performance, including the issued insurance policies and paid losses to the Central Insurance. The purpose of sending reports is to ensure compliance with the approved rates from insurance companies as well as other relevant regulations (see tariff control). All insurance companies are required to use the approved rates issuing the insurance contracts based on tariff control. In these circumstances there will be no possibility of competition between insurance companies. To attract more customers, adjustment of rates to change the contents of the contract is not possible. On the other hand, as the increase in market size happens, the insurance regulatory body oversees tariff uses and it is not able to monitor individually the rates of the insurance companies. Therefore, it is forced to limit their monitoring to the insurance rates which are high. Therefore, the secret violations and errors of insurance companies grow. To address the above problem, the Audit Organization of Iran with the help of Central Insurance issued accounting standard No. 28in 2006. The standard financial control has been replaced by a tariff control. This paper attempts to review the literature related to the current control of the insurance industry. The Iranian Accounting Standard No. 28 will also be extensively analysed.