Competition and socio-political conditions are perceived as the key challenges facing the Mena insurance market, according to a survey undertaken by the MENA Insurance CEO Club (MICC).
MICC undertook the survey among its members between December 2015 and January 2016. This showed that competition/ pricing was ranked as the top challenge facing the MENA market today (86%), followed by socio-political instability (71%) and regulation/ capital standards (50%).
Regulatory change was named as the top challenge (60%) in a previous survey done by the MICC.
Yassir Albaharna, CEO of Arig and MICC Steering Committee Member, says: "Both commercial and personal lines in the region are affected by excessive competition, with new and smaller companies being the biggest victims."
Albaharna adds: "We would recommend that the insurance market makes a concerted effort to
achieve pricing discipline and utilise opportunities for consolidation. Also, striving for premium growth instead of bottom-line returns could further exacerbate pricing conditions and ultimately, market capitalisation."
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Unsurprisingly, profitability was cited by the majority of CEOs (86%) as the most important area in terms of their companies’ development.
Optimising distribution (50%) came in second. Regional expansion was cited by only 14% of CEOs as a priority, which is perhaps a reflection of a cloudy economic outlook.
Discussing the most positive factors of 2015, Julio Garcia-Villalon, regional head, Midde East and Africa at MetLife, names the effective impact made by some of the regulatory changes. Garcia-Villalon says: "Among many such developments, I would highlight the recent introduction of the compulsory health insurance by the Dubai Health Authority, which has had a major positive impact on both the public as well as the industry."
Saudi Reinsurance Company CEO, Fahad Al-Hesni, said the most positive factor of 2015 was the interaction between the industry and the regulator, the Saudi Arabian Monetary Agency, resulting in new regulations to improve the Saudi market.
The survey also showed that uncertain economic growth was named by the majority (86%) of respondents as a key challenge facing their companies over the next year, followed by changing demographics and socio-economic trends (50%).
Talent availability and new product development were seen by 36% as key challenges.
Looking ahead, members named customer data analytics and improving operational processes (64% each) as key opportunities for companies over the next 12 months.
Better use of capital was cited by 43% as another key opportunity. As for challenges, uncertain economic growth was named by 86% of respondents as a key challenge facing their companies over the next one year, followed by changing demographics and socio-economic trends (50%).
2016 MEA outlook
Looking ahead to 2016, MetLife’s Garcia-Villalon expects the life insurance industry to continue growing in 2016 in the
He says: "Major infrastructure projects along with increasing customer awareness, a growing middle class population, digital capabilities and technology development, etc, provide an opportunity for insurers to grow and develop new distribution channels across the region to cover the arising needs of the individual and corporate clients, particularly since the MEA region remains underinsured with low levels of life insurance penetration."
Brian Reilly, country CEO Middle East at Zurich Insurance Company, predicts; "More pressure on rates despite everyone recognising the unprofitability."
Source for table above: Timetric
The recent introduction of compulsory health insurance by the Dubai Health Authority is justifiably viewed as a major boost for teh Mena region’s insurance market.
Qatar IPMI opportunity
In a related development, Kennedys law firm recently released a legal update on the suspension of Qatar’s mandatory health insurance scheme – and the opportunity this means for international private medical insurance (IPMI) providers.
The law firm said recent news confirmed that Qatar’s government has suspended the roll out of the mandatory health insurance programme as at 31 December 2015.
Effective from 1 January 2016, Kennedys said Qataris who have been benefitting from the national healthcare scheme will no longer be able to use it. The reports state that these nationals will transition to one of the leading private insurance companies in the country within the next six months but did not specify the interim measures and the transitional details.
The law firm added there is now a great opportunity for the IPMI provider market to take advantage of this sudden change in direction and provide its product offerings through compliant distribution channels both for the nationals and expatriates alike in Qatar.
Anand Singh, a partner an associate at Kennedys law firm in Dubai, explains the original plan was to extend Qatar’s mandatory health insurance scheme to all local Qatari residents ie the Qatari nationals and expatriates.
Singh says: "Now Qatar’s mandatory health insurance scheme will only cover local residents. Expatriates living in Qatar will have to seek private medical cover."
He adds: "The suspension of Qatar’s mandatory health insurance scheme is an opportunity for IPMI providers as non-admitted insurance is a grey area in Qatar and foreign companies are not so constricted to offering it to local residents."