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American Journal of  Economics and 
Business Innovation (AJEBI)

The Guarantee Pricing and the Analysis of  the Automotive Branch Insurance
Profitability in Tunisia
Abdelli Souleima1*, Abdelli Asma2

Volume 2 Issue 3, Year 2023
ISSN: 2831-5588 (Online), 2832-4862 (Print)

DOI: https://doi.org/10.54536/ajebi.v2i3.2094
https://journals.e-palli.com/home/index.php/ajebi

Article Information ABSTRACT

Received: Sepember 29, 2023

Accepted: October 26, 2023

Published: October 31, 2023

The presented study thoroughly investigates the technical profitability of  the Tunisian 
automobile insurance market using a quantitative research approach with interpretivism 
as its foundation. The study aims to offer insightful information about the dynamics and 
profitability of  the sector by concentrating on the combined ratio and applying the S/P ratio 
calculation. The data show that the Tunisian auto insurance industry faces serious obstacles. 
The S/P ratios continually exceeded 100% from 2019 to 2021, indicating a chronic problem 
of  low technical profitability. Notably, the civil responsibility guarantees considerably added 
to this imbalance, particularly in the “agricultural utility” and “2-wheel use” categories, with 
S/P ratios rising to frightening heights, like 937% in 2012. These findings highlight the 
pressing necessity for pricing modifications and a thorough comprehension of  the nuances 
of  the market. The Tunisian auto insurance industry must address underpricing concerns 
and increase overall profitability viable over the long run. This study offers helpful insights 
for policymakers and business experts trying to manage these difficult issues and promote a 
more vibrant insurance market.

Keywords
Automobile Insurance, Profitability, 
S/P Ratio, Insurance Premium

1 University of  Taif, Saudi Arabia
2 Higher Institute of  Management, Tunisia
* Corresponding author’s e-mail: soulaimaa_abdelli@outlook.com

INTRODUCTION
The Tunisian insurance landscape is dominated by the 
automobile insurance business, which makes a sizable 
financial contribution to the sector’s overall profitability 
(Chikalipah & Makina, 2019). Despite facing significant 
structural issues, the car insurance business has recently 
shown extraordinary resilience and development. 
According to Fabris et al. (2021), to determine the sector’s 
profitability, this paper conducts a thorough investigation 
of  guarantee pricing in the context of  automobile 
insurance in Tunisia. This research paper’s main goal is to 
decipher the complex pricing structure governing various 
guarantees in Tunisia’s auto insurance market, focusing 
on the optional and civil responsibility guarantees (Fabris 
et al., 2021). In addition, the study will include identifying 
structural imbalances in the combined ratio and 
identifying their root causes by carefully examining the 
sinistrality-to-premium (S/P) 1Ratios related to various 
forms of  guarantees in the automotive insurance sector.
This research clarifies the examination of  the technical 
profitability of  the industry and offers helpful insights 
into the combined ratio and other important tools for 
profitability evaluation (Abou-Foul et al., 2021). Second, 
it demonstrates a link between the combined ratio and 
sinistrality ratios, showing that they move in parallel 
directions between 2019 and 2021. Thirdly, it reveals a 
structural imbalance in the combined ratio throughout 
this period, which resulted in a deficit for the sector’s 
insurance firms. Notably, the use of  “agricultural utility” 
and “two-wheelers” over the years from 2010 to 2012 
is principally responsible for this imbalance. The study 
also reveals that the S/P ratio for the whole automotive 
insurance branch is frighteningly high, indicating that 

premiums are not enough to pay the expenses the 
insurance firms incur in processing claims (Graham, 
2018). The civil responsibility guarantee’s shortcomings, 
which in 2011 registered a sinister ratio of  around 200% 
and negatively impacted the sector’s profitability, are 
substantially to blame for this problem.

The Automotive Insurance Sector of  Tunisia: 
Profitability of  the Sector
Recognizing that the vehicle insurance sector holds the 
top spot in terms of  income creation in the insurance 
industry is crucial. According to statistics from 2021, the 
premiums granted in the car insurance industry totalled 
an astounding 1,199.738 million dinars (MD), which is a 
considerable increase from the 1,067.214 MD recorded in 
2019. Automobile insurance maintains its position as the 
market leader, taking a sizeable portion of  the premium 
market at a rate of  42.350% in 2021 compared to 44.20% 
in 2019. This is despite the significant institutional 
experience connected with this industry (Rudolph et 
al., 2021). These numbers demonstrate the continued 
importance of  the vehicle insurance market in Tunisia’s 
insurance market.

Vehicle Insurance Sector in Tunisia: Market Share 
and Growth Rate
The vehicle insurance sector in Tunisia stands as the 
largest and most pivotal segment within the insurance 
industry, contributing to over 40% of  the total gross 
written premium (GWP). This sector is poised for 
substantial growth, with an anticipated Compound 
Annual Growth Rate (CAGR) exceeding 7% throughout 
the period spanning 2021 to 2026 (GlobalData, 2022); 



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Fitch Solutions, 2023; Mordor Intelligence.; 2023). Several 
driving forces underpin the burgeoning growth of  the 
Tunisian vehicle insurance market. Initially, the escalating 
motorization rates in the country present a significant 
factor. According to Global Data (2022) statistics, the 
number of  registered motor vehicles in Tunisia has 
been on a steady rise, climbing from 2.5 million in 2010 
to 3.5 million in 2020. This trajectory is expected to 
persist, fueled by economic expansion and an upswing in 
disposable incomes.
Furthermore, there is a growing awareness among 
Tunisians regarding the importance of  vehicle insurance 
(Zone, 2021). The study by Belloum & Ouni (2019), the 
increasing awareness of  Automobile insurance in Tunisia 
can be attributed to various factors, including an uptick 
in traffic accidents, rising vehicle prices, and government 
initiatives geared towards promoting insurance 
penetration. The Tunisian insurance companies are 
diversifying their product portfolios to cater to the diverse 
needs of  their customers (Karaa, 2017). For instance, 
some insurers now offer policies that cover vehicle 
damage resulting from natural disasters, such as floods 
and sandstorms (Ozor & Nyambane, 2022). Moreover, 
the Tunisian government has introduced measures aimed 
at enhancing insurance penetration and safeguarding 
consumer interests. One noteworthy initiative includes 
mandating insurance coverage for all new vehicles (Arfa 
& Achouri, 2008).

Challenges Faced by Automobile Insurance Sector 
in Tunisia
The Tunisian vehicle insurance market confronts several 
challenges. According to the market analysis study by 
Global Data (2023), the automobile insurance industry of  
Tunisia contends with a relatively high claims ratio owing 
to factors like elevated traffic accident rates, fraudulent 
claims, and steep vehicle repair costs.  Moreover, Yin 
(2021) highlights that the sector operates in an intensely 
competitive environment, with over 20 insurance 
companies vying for market share. While the study also 
highlights that this competition has translated into lower 
premiums and a broader array of  product choices for 
consumers, it has also made profitability a formidable 
challenge for insurance providers.
Additionally, the regulatory framework governing the 
Tunisian insurance industry presents hurdles, as the 
insurance industry is designed to protect consumers and 
ensure financial stability. Dhieb et al. (2020) highlight that 
some industry participants argue that these regulations 
can be cumbersome and stifle innovation. In essence, 
the vehicle insurance sector in Tunisia represents a 
substantial and expanding market. The sector’s growth 
trajectory is expected to persist in the coming years, driven 
by the rising rates of  motorization, growing awareness of  
insurance importance, and an expanding array of  product 
offerings (Ofori-Boateng et al., 2022). This resilience, despite 
the challenges, underscores the enduring significance of  the 
vehicle insurance sector within Tunisia’s insurance landscape.

LITERATURE REVIEW 
According to Tidd & Bessant (2020), the technical 
profitability of  the vehicle insurance market has 
long drawn considerable interest from the insurance 
community and academic study. For both business 
professionals and policymakers, it is essential to 
comprehend the variables that affect the profitability of  
automotive insurers. Industry data show a complicated 
picture. The rising number of  automobiles on the road 
and many nations’ insurance mandates have contributed 
to the global auto insurance market’s consistent rise in 
recent years (Ogunkunle & Ahmed, 2019). Profitability, 
however, has fluctuated because of  a number of  causes. 
The study by Grace and Fenn (2019) emphasizes the 
significance of  claims management and underwriting for 
technical profitability. It has also been discovered that 
insurers with strong pricing and risk assessment models 
typically do better in terms of  profitability.
Furthermore, improvements in data analytics and 
telematics have given insurers the capacity to assess 
risk more accurately and customize rates, which has a 
favourable effect on their profitability (Eling & Lehmann, 
2018). According to Rae et al. (2022), It is inconceivable 
to disregard the effects of  external factors like economic 
conditions and regulatory changes. Research by Ameset 
al. (2018) highlights how regulatory changes may have 
a big impact on insurer profitability. For instance, 
modifications to liability rules or healthcare standards 
may affect how much a claim may cost. Profitability 
also heavily relies on investment revenue from insurers’ 
portfolios. Low-interest rates, as seen in recent years, can 
reduce investment returns and increase the profitability 
of  underwriting. As a result, technical profitability in the 
vehicle insurance industry is a complex problem driven by 
a variety of  elements, including underwriting procedures, 
claims handling, legislative changes, and investment 
performance (Janků & Badura, 2021). Researchers and 
business professionals keep looking for novel ways to 
maintain and improve profitability in this dynamic sector. 

Pricing of  Guarantees in Automobile Insurance of  
Tunisia
Within the realm of  motor insurance, the guaranteed price 
has critical significance. Given that charges are billed and 
paid prior to the occurrence of  any nefarious occurrences, 
they constitute a crucial link in the functioning of  
insurance businesses. According to Keucheyan (2018), 
inadequate pricing may put the financial stability of  
insurance firms at risk, having a negative effect on both 
insurers and covered parties. Guarantees in vehicle 
insurance may be divided into two groups: those that 
are legally required to be provided and whose costs are 
subject to regulation, and those that are voluntary and 
provide both policyholders and insurers some degree of  
freedom (Inês et al., 2020). Surprisingly, there aren’t many 
thorough literature evaluations that explore technological 
profitability in this industry. The majority of  currently 
conducted research generally focuses on topics like car 



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insurance claims, fraud detection, and the function of  
auto repair businesses. For instance, Cohen and Cavoli 
(2019) examined how auto insurance renewal decisions 
are made by examining all aspects accessible, including 
claims information. Similar to this, Ricciardi et al. (2023) 
have suggested ways to stop fraud in support of  the 
special investigative teams at insurance firms. For each 
claim, they use picture analysis to retrieve crucial vehicle 
data. Additionally, Macedo et al. (2021) have investigated 
the part that auto repair businesses play in automobile 
insurance fraud and how they could help to lessen or 
exacerbate such illegal activities.

Optional Guarantees in the Tunisian Automobile Sector
Tunisia’s vehicle insurance market provides a number of  
optional guarantees that let customers tailor their coverage 
to meet their unique requirements and preferences. 
According to Fischer-Daly & Anner (2021), the Tunisian 
Insurance Federation (FTUSA) regulates the pricing of  
these supplementary guarantees, which offer extra security 
above and beyond the required coverage. The Robbery 
Guarantee is one of  these extra guarantees; it pays for 
harm caused by the insured vehicle disappearing or 
degrading as a result of  a robbery or attempted theft. The 
cost of  this guarantee is determined using a percentage 
of  the car’s market value that FTUSA specifies (Eldar, 
2020). The Fire and Explosion Guarantee, which covers 
damage brought on by fire, explosion, spontaneous 
combustion, lightning strike, and other similar disasters, 
is another crucial choice. The premium for this guarantee 
is calculated as a proportion of  the market value of  the 
insured vehicle, the same as the robbery guarantee.
Accidental Damage with or without Collision is another 
optional assurance provided by Tunisian vehicle insurance 
providers (Kubwimana., 2022). The Guarantee option is 
essential since it pays for actual damages to the covered 
vehicle brought on by accidents, shocks, overturning, and 
other unavoidable occurrences. Pricing varies according 
to how the car is used and may include extra coverage 
from avalanches, riots, calamities, or terrorist attacks. The 
Force of  Nature Guarantee kicks in after a natural disaster 
(Chakalian et al., 2019). This guarantee covers losses 
brought on by storms, avalanches, floods, earthquakes, 
and other natural disasters. Individual insurance firms 
normally determine the cost of  this assurance. The Glass 
Damage Guarantee, with the exception of  a few select 
goods, covers unintentional glass component damage 
in vehicles. The cost of  this assurance may differ across 
insurers. The Collision Accidental Damage Guarantee 
pays for repairs in cases of  accidents involving other 
people’s cars (Wang & Xu, 2018). The insured’s selections 
for coverage limits and deductibles will determine the 
price for this assurance.
In instances of  legal issues relating to covered incidents, 
the insured is supported financially and legally by 
the Defense and Recourse Guarantee against Special 
Insurance (Parker & Schaefer, 2021). The price of  this 
guarantee varies between insurers and might be affected 
by the kind of  coverage selected. The carried Persons 

Guarantee compensates people who aren’t third parties, 
such as the driver, their loved ones, coworkers, and 
employees, to assure the safety of  people being carried 
in the insured vehicle. According to Mutaqin & Usami 
(2019), the chosen coverage level and the total number of  
insured locations are used to determine the premiums for 
this guarantee. When operating the insured vehicle, the 
driver is explicitly protected by the Driver Plus Guarantee 
in the case of  an accident. 
The last option, the Accumulated Damage Guarantee 
(Specific to GAT Insurance), is designed specifically for 
automobiles under ten years old and includes coverage 
for theft, fire, and damage to the vehicle. The age of  the 
vehicle and other considerations decide the insurance 
amount for this set of  assurances (Schierman et al., 2020). 
These supplementary assurances’ availability and cost may 
differ across Tunisian insurance firms. When choosing 
coverage, policyholders should carefully assess their 
demands as well as the exact terms and circumstances of  
these assurances.

The Civil Responsibility Guarantee in the Automobile 
Insurance Sector of  Tunisia
The Civil Responsibility (RC) Guarantee, a component 
of  Tunisia’s automotive insurance market, is crucial 
in ensuring that those hurt in accidents have access to 
financial support. It is required by the Tunisian Insurance 
Code and is made to pay for the insured’s civil liability for 
harms brought on by the operation of  a motor vehicle (Al-
Mawla & Al-Mawla, 2021). The RC Guarantee financially 
shields the insured from claims stemming from mishaps, 
fires, or explosions brought on by their motor vehicle, 
as well as its trailers, equipment, and accessories. This 
warranty is essential because it guarantees that victims 
including other motorists, pedestrians, cyclists, and 
passengers receive compensation for harm and property 
damage brought on by the insured’s vehicle.
The RC Guarantee’s limitless bodily injury coverage 
sum is one of  its standout features. This guarantees that 
victims are fairly paid even if  the accountable party ends 
up becoming bankrupt. In this way, the guarantee works 
to safeguard the rights of  accident victims (Schmitt, 
2020). However, as stated in the Insurance Code, there 
are specified exceptions to the RC Guarantee. These 
include those working in the automotive industry (repair, 
maintenance, or trade), damages incurred by accident 
victims, drivers who lacked the necessary licenses at the 
time of  the occurrence, and passengers sitting outside 
the car’s bodywork. According to Tlili (2022), in Tunisia, 
the cost of  RC insurance is based on a tiered system that 
considers both the type of  vehicle being used and the 
horsepower of  the engine. For various vehicle usage, 
including personal, commercial, agricultural, and more, 
different prices are presented in Table 01.  encourage safe 
driving practices, the RC Guarantee also uses a bonus-
malus system.

Civil Responsibility Insurance Tariffs for Users of    
Land Vehicles with Motor



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Table 1: Pricing for business usage
Fiscal  power of  the engine in horses 2 3 to 4 5 to 6 7 to 10 11 to 14 15 and more
Price excluding tax  in dinars 94 110 140 170 220 264

Table 2: Tariffs for transporting goods on your account
A) Price (excluding tax) of  the vehicles whose gross weight does not exceed 3.5 Tons
Fiscal power of  the engine in horses 2 3 to 4 5 to 6 7 to 10 11 to 14 15 and more
Price excluding tax in dinars 145 171 214 262 338 405
B) Price (excluding tax) of  the vehicles whose total weight exceeds 3.5 tons in DT

Price (excluding tax)
Basic premium 257
Additional premium. 21 for each additional ton whose total weight  exceeds 3.5 ton

Table 3: Transport of  goods for the third parties
A) Vehicles whose gross weight does not exceed 3.5 tones: (Apply the tariff  relating to the vehicles intended 
for the transport of  goods on its account referred to A)
B) Vehicles whose total weight exceeds 3.5 tones:

Price (excluding tax) in dinars
Basic premium 250
Additional premium. 4 for each additional ton whose total weight  exceeds 3.5 ton

Table 4: Agricultural use
A) Vehicle whose gross weight does not exceed 3.5 tones: in TND
Fiscal power of  the engine in horses 2 3 to 4 5 to 6 7 to 10 11 to 14 15 and more
Price excluding tax 84 97 122 150 193 232
B) Vehicle whose total weight exceeds 3.5 tones in DT:

Price excluding tax
Basic premium The tariff  relates to the vehicles intended for agricultural usage 

with a gross weight not exceeding 3.5 tons
Additional premium 13 for each additional ton whose weight exceeds 3.5 Ton

Table 5: Prices of  machine and agricultural tractors in DT
Type of  véhicules Price excluding tax
Type 1
Made of  rubber with wheels 42
With tracks 31
Type II 117
Type III
Made of  rubber with wheels 84
With tracks 59
Type IV 177

Table 6: Prices for two-wheelers in DT
Price excluding tax

Less than or equal to  125CC 62
Above 125CC 168

Sources: Circular No. 1/2017 of  28 February setting the tariff  for civil responsibility insurance due to the use of  motor land vehicles           
(General Insurance Committee (CGA)



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Table 7: Use: Rental (5 seats without driver)
New Pricing (2014)

Annual Semestrial
Net Tax Net Tax

Civil responsibility 1139,033 136,684 569,517 68,342
Cost of  the contract 40,000 4,800 40,000 4,800
Appeal to a third2 50,000 5,000 25,000 2,500
Robbery 79,102 7,910 39,551 3,955
Fire 82,902 8,290 41,451 4,145
FGVAC 0,300 0,300
FPAC 0,500 0,500
FGA 1,000 1,000
Total 1555,522 1555,522 801,061 801,061

Robbery Fire
Basic premium 38,502 38,502
Rate in  % 4,06 4,44
Surplus in each place
Annual: 113,904 Tax: 13,668
Semestrial: 56,952 Tax: 6,834

Source:chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ftusanet.org/wp-content/uploads/2015/10/Tarif-6.pdf

Table 8: Use: Rural transport Vehicle value=10000D
New Pricing (2014)

Annual Semestrial
Net Tax Net Tax

Civil responsibility 877,152 105,258 438,576 52,629
Cost of  the contract 40,000 4,800 40,000 4,800
Appeal to a third3 50,000 5,000 25,000 2,500
Robbery 79,102 7,910 39,551 3,955
Fire 82,902 8,290 41,451 4,145
FGVAC 0,3 0,3
FPAC 0,5 0,5
FGA 1 1
Total 1262,214 1262,214 654,407 654,407

Robbery Fire
Basic premium 38,502 38,502
Rate 4,06% 4,44%

Source: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ftusanet.org/wp-content/uploads/2015/10/Tarif-6.pdf

Table 9: Use of  taxi (+4 places) Vehicle value=6000D
New Pricing (2014)

Annual Semestrial
Net Tax Net Tax

Civil responsibility 450,818 54,098 225,409 27,049
Cost of  the contract 40,000 4,800 40,000 4,800
Appeal To A Third 50,000 5,000 25,000 2,5
Robbery 54,408 5,441 27,204 2,720
Fire 55,188 5,519 27,594 2,759
FGVAC 0,3 0,3



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FPAC 0,5 0,5
FGA 1 1
Total 727,071 727,071 386,836 386,836

Robbery Fire
Basic premium 25,668 25,668
Rate 4,79% 4.92%

Source: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ftusanet.org/wp-content/uploads/2015/10/Tarif-6.pdf

Table 10: Use of  tourist taxi (+4 places) Vehicle value=8000D
New Pricing (2014)

Annual Semestrial
Net Tax Net Tax

Civil responsibility 547,421 65,691 273,74 32,845
Cost of  the contract 40,000 4,800 40,000 4,800
Appeal To A Third 50,000 5,000 25,000 2,5
Robbery 63,988 6,399 31,994 3,199
Fire 65,028 6,503 32,514 3,251
FGVAC 0,3 0,3
FPAC 0,51 0,5
FGA 1 1
Total 856,629 451,615

Robbery Fire
Basic premium 25,668 25,668
Rate 4,79% 4.92%

Source: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ftusanet.org/wp-content/uploads/2015/10/Tarif-6.pdf

Table 11: Use: Collective taxi Vehicule value =10000D
New Pricing (2014)

Annual Semestrial
Net Tax Net Tax

Civil responsibility 877,152 105,258 438,576 52,629
Cost of  the contract 40,000 4,8 40,000 4,800
Appeal to a third 50,000 5,000 25,000 2,500
Robbery 79,102 7,910 39,551 3,955
Fire 82,9 8,290 41,451 4,145
FGVAC 0,3 0,3
FPAC 0,5 0,5
FGA 1 1
Total 1262,214 1262,214 654,407 654,407

Robbery Fire
Basic premium 38,502 38.502
Rate %4.06 %4.44

Source: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ftusanet.org/wp-content/uploads/2015/10/Tarif-6.pdf

Table 12:  The pricing of  the robbery guarantee
% 2.62‰ 2.36‰ 1.75‰
Pricing 
type

- Personal use: transport of  goods for its 
account (truck <3.5 tons)
--Agricultural use (truck >3.5 Ton), agricultural 
machinery, tractors and work machinery

Agricultural use 
(truck <3.5 Ton),

-Transportation of  goods for 
personal use (truck>3.5 tons)
-Transport of  goods on behalf  
of  a third party (truck>3.5 tons)



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Table 13:  The pricing of  the fire guarantee
% 2.79‰ 3.06‰ 4.37‰ 5.68‰ 6.29‰
- Type of  
pricing

- Agricultural use
(truck<3.5Ton)

- Personal use - Transport of  goods for its 
account (truck <3.5Ton)
-Agricultural use
(truck >3.5 Ton),
-Agricultural machinery, 
tractors and machines of  
work
-Motorcycles

- Transport of  
goods for its 
account
(truck>3.5Ton)

Transport of  
goods on behalf  
of  third parties
Trucks>3.5Ton)

Amount 10000 basic 
premium + 2.79‰    
the market value 
of  the vehicle

10000 basic 
premium+ 
3.06‰ the 
market value 
of  the vehicle

10000basic premium + 
4.37‰ the market value 
of  the vehicle

10000basic 
premium + 
5.68‰ the 
market value 
of  the vehicle

10000basic 
premium  + 
6.29‰ the 
market value of  
the vehicle

Source: https://www.ftusanet.org/tarifs/(https://www.ftusanet.org/wp-content/uploads/2016/02/%d9%85%d9%84%d8%ad%d9%82-
%d8%b9%d8%af%d8%af4.pdf)

METHODOLOGY
The aims of  the current study resonate with the qualitative 
research method, offering an immersive exploration of  
intricate phenomena to uncover the underlying dynamics 
of  the technical profitability of  the automobile insurance 
sector of  Tunisia. Furthermore, the study’s objectives 
align with the interpretivism philosophy, as Cuthbertson 
et al. (2020) highlight the significance of  the interpretivist 
paradigm in comprehending individuals’ perceptions, 
experiences, and contextual meanings. Through this lens, 
the research gains unparalleled insights into the intricate 
relationship between central to this endeavour is an 
inductive approach, which also aligns with the study scope, 
as the technical profitability of  the Automobile insurance 
of  the companies and its performance based on the S/P 
ratio (Robinson et al., 2020). According to Place (2022), 
the qualitative method serves as a gateway to a nuanced 
comprehension of  the intricate web of  relationships 
within the research subject, delving into the subtleties that 
quantitative analyses may overlook. Furthermore, Toker 
et al. (2019) expand that the interpretivism philosophy 
embraces the richness of  human experiences, shedding 
light on the multifaceted relationship between the sinister 
ratio and the premium paid by the companies, which 
will provide an effective illustration of  the technical 
profitability of  the automobile insurance sector of  
Tunisia. By embracing the unexpected, the inductive 
approach enhances the authenticity and robustness of  
findings, mirroring the dynamic and evolving nature of  
the subject under investigation, as highlighted by So et 
al. (2021). In the synthesis of  these elements, the chosen 

methodology becomes a vehicle for in-depth exploration, 
alignment with the research objectives, and the unveiling 
of  novel insights that enrich the academic discourse on 
the interplay between different guarantees and the profit 
earned by the automobile insurance companies in Tunisia 
(Asante et al., 2023; Gagai, 2022; Zheng et al., 2022).

Data Collection and Analysis
A diverse set of  qualitative data from pertinent sources 
will be gathered during the data collection procedure. 
This may include of  scholarly writings, documents 
outlining policy, and industry studies that have looked at 
the technical profitability using the S/P ratio calculation. 
It can be examined by figuring out Tunisia’s S/P ratio for 
the automobile insurance sector.

RESULTS AND DISCUSSION 
A combined ratio is used to evaluate the insurance 
markets in various nations and is used to analyze technical 
profitability (see equation 2). Financial analysts typically 
use it to assess the profitability of  various firms’ insurance 
divisions. A percentage of  premium revenue is used to 
quantify the relative cost of  insurance.
Combined Ratio= sinister rate + operating coefficient              (1)
Sinister ratio=sinister expense /Net earned premiums            (2)
Exploitation coefficient= exploitation expenses/net earned 
premiums                              (3)
The data from the years 2019 through 2021 have been 
taken from the official government website. In order to 
compute the combined ratio, we must first calculate the 
sinister rate and then the operating rate.

The 
amount

15000basic premium+2.62‰ of  the market 
value of  the vehicle

15000 basic 
premium + 2.36‰ 
of  the market value 
of  the vehicle

15000basic premium +1.75 
‰ of  the market value of  the 
vehicle

Source: FTUSA (https://www.ftusanet.org/wp-content/uploads/2016/02/%d9%85%d9%84%d8%ad%d9%82-%d8%b9%d8%af%d8%af4.
pdf



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The Graphic Illustration and Interpretation
The combined ratio follows the same trend as the sinister 
ratio, as can be seen by looking at the table and graph 
below. We can see that the surplus in the vehicle branch 
is due to the fact that the sinister costs are lower than the 
earned premiums. In fact, the graph demonstrates that 
the ominous (sinister) ratio changes between 2019 and 
2021, reaching its minimum in 2020 before tending to 
increase subsequently.

It should be noted that a combined ratio below 100% 
indicates a favourable outcome for the insurer’s activities, 
while a ratio beyond 100% indicates a poor outcome from 
a technical standpoint. In our example, the combined 
ratio is above 100% in 2019 and 2021, indicating negative 
technical profitability, while it is below 100% in 2020. 
Due to the structural imbalance of  the branch shown 
by this ratio, the business needs to make a sizable profit. 
We suggest analyzing the ratio by the type of  assurance 

Table 14: The combined ratio in percentage
2019 2020 2021

Sinister expenses  in MD 764,145 686,040 837,086
Net earned premium  in MD 1 031,114 1 073,777 1 162,326
Sinister ratio 0,7411 0,6389 0,7202
Operating expense (management expense) in MD (3) 290,928 323,435 347,952
Operating coefficient 0,28214921 0,30121245 0,29935836
Combined ratio 1,02324921 0,94011245 1,01955836

Figure 1: Curves of  sinister ratio, operating coefficient and combined ratio

(optional vs. non-optional) in order to comprehend this 
deficiency. The sinister ratio is written as follows on the 
other side:
Ratio of  sinistrality= sinistrality expense + operating expense  (4)
However, the operating expenses only affect a little 
the combined ratio compared to the sinister expenses. 
Therefore, we will analyze the sinister-to-premium ratio 
S/P ratio, with S and P being the sum of  sinister and the 
sum of  optional and non-optional premiums, respectively. 
We notice:
S/P= optional sinister ratio*(1-p) +non-optional sinister ratio*

                                                        
             (5) 

If  there is additional information about the various sorts 
of  assurances, this equation enables us to comprehend the 
causes of  the imbalance. The analysis of  the operational 
performance of  the car, transportation, and fire insurance 
is presented in Table 15 below. Before beginning the 
interpretation, keep in mind that the insurance company 
divides the cost of  the compensated sinister (including 
administration costs) by the sum of  the premiums 
received in order to determine the sinister-to-premium 
ratio (S/P). The ratio achieved must be smaller than 1 
in order for the insurer’s business to be profitable. Table 
15 shows that the highest rates for vehicle insurance in 
MD were granted in the years 1067,214 in 2019, 1107,798 

Sf  : Sinister related to the optional guarantees.
Snf  : Sinister related to the non-optional guarantees.
pf  : Sinister related to the optional guarantee.
pnf  : Premiums related to the non-optional guarantees.
S/P= optional sinister ratio*(1-p) +non-optional sinister 
ratio *p



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in 2020, and 1199,738 in 2021. Transport insurance, 
however, has the lowest premiums (84,658 MD in 2019, 
75,752 MD in 2020, and 88,69 MD in 2021). The greatest 
S/P ratio relates to automotive insurance by comparing 
the S/P ratios for the three categories of  guarantees: 
automobile, fire, and transport. Around 100%, this ratio 
is almost constant. Due to the fact that the premiums 
collected are insufficient to cover the quantities of  
sinister, the S/P ratio for the whole car branch is seen as 
being extremely high. Despite the positive outcomes of  
the other guarantees, this issue is mostly caused by the 
civil responsibility guarantee’s inefficiency, which exhibits 
an ineffectiveness of  about 200% and severely affects the 
branch’s profitability.
The S/P ratio for fire insurance increased from 61.38 in 
2019 to 113.82 in 2021, indicating that it was not steady 
from 2019 to 2021. However, the S/P ratio for transport 
insurance is the lowest, falling from 29.43% in 2019 to 

24.37% in 2021.
The analysis of  the automobile’s civil responsibility (RC) 
at this level of  the industry shows a sinister Premiums 
(S/P) rate that is effectively well above 100% for the years 
2010 to 2012. This underpricing is made all the more 
unfortunate by the fact that no business in the industry 
managed to generate a technical surplus in the Auto 
category between 2010 and 2012 (a technical surplus 
is one in which the S/P ratio is less than 100%). Table 
16 shows that the civil liability insurance sinistrality rate 
is, on average, 192%. We conclude that the S/P ratio in 
2011 demonstrated consistent growth within the context 
of  the civil responsibility guarantee. In fact, it showed 
a comparatively high rate in 2011, which was 200%, 
compared to 178% in 2010. Even while the premiums 
paid under this guarantee have increased, they still need 
to cover the high levels of  expenditure.

Challenges of  Calculating the Equilibrium Rate of  
Civil Responsibility Insurance
As stated in Article 110 of  the Insurance Code, civil 
responsibility (“RC”) insurance for land motor vehicles 
has been required since 1960 (Bertolini & Riccaboni, 
2021). Both the car owner and the insurers, who are 
obligated to provide insurance, are burdened by this 
responsibility. However, Bergkamp (2021) states that it 
must be acknowledged that the State’s assessment of  the 
civil liability risk needs to be revised. The public authority 

Table 15: Analysis and operating results of  the automobile, transport and fire insurance
Automobile Insurance Transport Insurance Fire Insurance
2019 2020 2021 2019 2020 2021 2019 2020 2021

Issued premium in 
MD

1067,214 1107,798 1199,738 84,658 75,752 88,69 135,40 145,82 161,82

The part of  the 
premium in the 
total emissions 

44,20 % 43,07 % 42,35 % 3,51 %  2,95% 3,13 % 5,61 % 5,67 % 5,71 %

Paid sinister in  MD 737,152 634,499 714,312 26,718 13,804 28,170 90,253 107,160 103,53
 Earned  premium5 1031,114 1073,777 1162,326 81,755 77,754 86,49 137,37 145,20 154,58
Management fees 
in MD6

290,928 323,435 347,952 19,293 22,114 23,317 40,592 44,458 44,45

sinister to earned 
premium ratio in %

102,32 94,01 101,95 29,43 19,80 24,37 61,38 70,04 113,82

Technical results
The subscription 
balance in MD 

254,001 400,691 319,741 61,137 55,548 69,027 47,445 39,631 -20,981

Management fees 
in MD

290,928 323,435 347,952 19,293 22,114 23,318 40,598 44,457 44,457

The financial 
balance in MD

117,497 110,954 124,924 3,474 2,687 3,531 12,926 9,048 11,821

The reinsurance 
balance (result of  
cession) in MD

33,369 33,159 29,181 -25,780 -31,934 -40,077 -8,685 -5,686 64,961

The technical result 
of  MD

47,200 155,051 67,533 19,538 4,187 9,164 11,087 9,907 11.344

Source: FTUSA 2021 report (Tunisian Federation of  insurance companies)

Table 16: The S/P ratio of  the civil responsibility auto 
(2010-2012)

2010 2011 2012
Premium 201 206 211
Total  cost 357 413 419
Sinistrality rate 178% 200% 198%

Source: Reform of  the automotive civil responsibility insurance in 
Tunisia: inventory and recommendations 2015



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(State) price will apply to this risk. This price is legitimate 
in two ways: (i) to safeguard customers’ purchasing power 
who are compelled to purchase this insurance service at 
an excessive price.; (ii) to ensure the price is reasonable, 
to avoid potential dumping amongst businesses, to secure 
these businesses’ solvency, and, as a result, to assure the 
insured’s protection. Unfortunately, despite the fact that 
this dual obligation should force the State to exercise 
extreme restraint so that the price accurately reflects the 
true cost of  the evil(sinister), the periodic adjustment 
of  these prices has historically been flawed, leading to a 
glaring underpricing that had negative knock-on effects 
on the industry (Boyd, 2018). The General Committee of  
Insurance (“CGA”) did not appear to be in a position to 

The combined ratio, with an emphasis on the S/P ratio 
equation, is used in the study to measure the profitability 
of  insurance operations through data collecting and 
analysis. The results show that the vehicle insurance 
industry is facing difficulties, with S/P ratios that routinely 
surpass 100% and indicate low technical profitability. 
The civil liability guarantee, especially for “agricultural 
utility” and “2-wheel use,” greatly adds to this disparity. 
In order to ensure the sector’s viability, the research 
emphasizes the necessity for pricing modifications and a 
deeper comprehension of  its dynamics.

RECOMMENDATIONS
Addressing non-optional sinistrality rates is essential for 
enhancing the S/P ratio. This may be accomplished by 
enhancing traffic safety measures, lowering the number 
of  insurance claims, and putting in place an efficient risk 
reduction technique. Furthermore, maintaining market 
profitability and fairness will result from readjusting 
premiums to represent risk profiles appropriately. 
Encouragement of  optional coverage and package 
formulae, similar to popular designs like the GAT, among 
policyholders can raise overall premium levels. A more 
sustainable and effective insurance market in Tunisia can 
be achieved by adopting key principles from Morocco’s 
insurance reform, such as increasing the basic civil 
responsibility premiums, lowering accident frequency 
through data-driven prevention, and lowering average 
claim costs through digitalization, compensation scale 
revisions, and alternative dispute resolution mechanisms.

Acknowledgements
We would like to thank Ms. Ben Arab for her support, 
guidance and pertinent remarks, as well as Ms. Besma 
Salhi for the documentation provided in this area.

Funding
The researchers would like to acknowledge Deanship of  
Scientific Research, Taif  University for funding this work.
  
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Table 17: Sinistrality (ratios S/P) as a function of  uses
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Appendix
1Ratios are calculated by the insurer in order to check 
the profitability of  an insurance policy: it consists of  
calculating the ratio between the amount of  sinister 
divided by the premiums (S/P) or contributions collected 
(S/C) under the same contract.
2Generally, an appeal is the fact of  appealing to a third 
person or an institution to obtain recognition of  a right 
that has been disregarded. Appealing can be amicable or 
contentious, and depending on the subject of  the dispute, 
it can be civil or administrative.
3Management fees: acquisition fee and the other net 



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management expenses.
4The earned premiums correspond to the proportion of  
the issued premiums that have been earned during the 
accounting period. The issued premiums cover the period 
indicated in the insurance policy. The difference between 

issued premiums and earned premiums is a provisioned 
amount which is included in the reserves for unearned 
premiums. These amounts are treated as assets belonging 
to the assured.
5(Acquisition costs + Other net management costs)


