UAE residents will have to shell out more for medical and motor cover, but less for providing protection to their properties in the coming year as insurance premium growth is showing a varied trend.
The insurance industry in general is expected to witness moderate growth in the face of improving fiscal activity and macro-economic factors, according to a report by investment bank advisory group Alpen Capital.
Governments’ proactive economic and liberalisation reforms, and efforts to strengthen the regulatory environment, will support growth in the sector going forward.
A steady rise in population coupled with the increase in senior population within the region is expected to boost premiums of the health segment.
“The GCC insurance industry which maintained a positive momentum over the years, witnessed a slowdown in gross premiums due to sluggish economic conditions during 2016 and 2018.
“However, going forward, we anticipate the GCC insurance sector to grow at a moderate pace owing to economic revival, growing population, strengthening regulatory reforms and continued implementation of mandatory insurance coverage. Infrastructure development, in line with upcoming mega events, are expected to further aid growth in the segment,” Sameena Ahmad, managing director, Alpen Capital (ME), said releasing the report.
More cost benefit
On a micro level, the gradual slowdown over the past two years is likely to continue until 2024, which means customers will have a cost benefit.
“People will have a cost saving as insurance premiums are expected to go down. However, in some tightly regulated markets and for subsidised products in health insurance, the premiums are set to increase since subsidies are gradually withdrawn,” said Sajith Marakar, managing director, Consolidated Services Bureau, surveyors based in Abu Dhabi, UAE.
The non-life insurance market is expected to grow at a CAGR of 4.3%, primarily aided by mandatory insurance business lines, new regulations improving the pricing of policies, anticipated recovery in economic activity, and subsequent rise in infrastructure investments.
Growth in non-life premium means people will have to spend more providing insurance cover for their properties, businesses and services.
“Your car insurance cost will also go up moderately in those markets where minimum premium conditions are imposed by regulators, though there is competition in the market. Other than that in coming years you can provide protection to your properties for less,” says Sajith Marakar.
Health insurance
The premium increase will be more pronounced in the case of health insurance. After remaining stable in the past three years medical insurance premiums in the UAE are set to increase moderately.
In line with the global trend that employers and workers will shell out more cash for health insurance in 2020, the UAE will follow suit.
Abu Dhabi and Dubai governments have introduced compulsory health insurance for private sector employees which stoked competition among insurers by undercutting premiums.
However, when it started impacting their bottom lines with higher claim rates, the companies found themselves in a quandary to increase premiums at the cost of their market shares.
In the medical segment, policies for the purpose of visa renewal were issued for one year while the employment visas are for two years. This resulted in a major drop in health premiums in 2018. This also triggered a price war and resulted in a rate reduction between 35-40%.
“When it percolates down to the insured, the cost of protection and risk cover should increase when insurance companies project premium growth,” said R Ramesh, chief executive officer, Veracity Consulting FZE. In short, a mixed trend is predicted for life and non-life insurances.
