Middle East insurance market in the pink of health

Despite economic headwinds and lower oil prices, insurance markets in the Middle East have remained resilient on the back of a surge in gross written premiums in two of the region's largest markets - the UAE and Saudi Arabia.

While the UAE insurance market, which exceeded the $10 billion gross written premiums mark, was supported by the roll-out of the mandatory Dubai health scheme (premium growth of 19 per cent in 2016), recent premium growth in other Middle east and North Africa insurance markets has been subdued, according to EY's report 'Insurance Opportunities in the Middle East.'

On the horizon for the UAE's fast-growing insurance market, which accounted for Dh40 billion in premiums and Dh73.7 billion in assets in 2016, are new regulations.

According to Ibrahim Obaid Al Zaabi, director-general of the UAE Insurance Authority, preparation and issuance of legislative frameworks for the licensing of re-insurance companies are in the pipeline. Also under way are draft law for licensing offices of insurance companies and draft law concerning electronic insurance directives. New legislative framework for establishment of a compensation fund for the victims of unknown or uninsured vehicle accidents is also under consideration.

As in other Middle East markets, health insurance is the largest and fastest growing line of business in the UAE as well. The high growth in health insurance premiums (2011-15 CAGR: 23 per cent) has been the key driver for the overall UAE market's double-digit growth (2011-15 CAGR: 11 per cent). Health insurance penetration has been on the rise on the back of the introduction of mandatory health insurance in Abu Dhabi nearly a decade ago and more recently in Dubai and a shift toward private health care.

Sanjay Jain, EY Mena insurance leader, said the Mena insurance markets are going through a four-pronged disruption, which is originating from increasing customer expectations, regulatory changes, technological advancements, and economic pressures. "While we see pockets of growth, how individual insurers respond to these emerging challenges, will define the future leaders of the business."

The EY report said profitability remains a key concern for Mena insurers. As investment income has not contributed significantly to shareholder returns, insurers have focused on technical profitability and cost reduction. While cost -cutting measures may bring short-term relief, sustained results can only be achieved by a well-executed operational transformation strategy, backed by robust technology and a customer-centric approach.

The report said seven insurance trends are expected to drive the Mena insurance markets in the near future. These include value added tax, IFRS, robotics, analytics, digital, technology and cyber.

Shaun Crawford, EY global lnsurance leader, said emerging markets remain a very exciting story for the insurance sector. In the recently launched EY report, 'Emerging Markets Matter', 22 emerging markets were identified as the main drivers of premium growth over the next five years. The UAE and Saudi Arabia secured 10th and 11th place from 22 countries assessed in terms of opportunity for 'significant premium growth' and sixth and seventh place respectively in terms of 'least amount of risk'.

Customer-centricity is expected to drive innovation in the Mena insurance markets and insurers need to take notice and explore opportunities to deploy technology and automation. Another priority is to embed analytical tools for precise decision-making, not only on the front end with customer analytics but also to support profitability, through claims and fraud analytics, EY report said.

Rohan Sachdev, EY global insurance emerging markets leader, said having witnessed the trends from a number of emerging markets over the recent years, the Middle East markets are going through a similar maturity curve, in terms of improving insurance penetration and maturing regulations, which "augurs very well for the industry in the long term."

Gordon Bennie, EY Mena financial services managing partner, said consolidation could ultimately be positive for the market as a whole, as a small number of strong players would result in a more robust market. "Economic activity in the region is also expected to revive, though at a slower rate than in the last decade."

Source: Khaleej Times