The insurance industry in the UAE will see a modest reduction in gross written premiums in 2020 and the bottom line will be lower than in previous years, an industry seminar has predicted.
This is despite the sector remaining resilient and, operationally, coping with the covid-19 pandemic better than any other industry.
Pricing in healthcare is expected to go up, as there will be big demand for medical services; online distribution is catching up and motor premiums are going down, according to speakers at the conference, which was organised by insurers, brokers and allied partners.
The industry has not been as deeply affected as other sectors because insurance is seen as a mitigator of economic challenges.
“There will be fall in the premium in the longer term. In 2020, we expect an average 10% reduction in gross written premium in the UAE, and similar trend in other GCC markets, particularly when the market is opening up,” said Safdar Jaffer, managing director and consulting actuary, Milliman Middle East and Africa.
He was addressing a seminar also attended by Walter Jopp, chief executive, Middle East, Zurich Insurance Company; Jerome Droesch, chief executive, Cigna Middle East and Africa; George Kabban, chief executive UIB (DIFC) and chairman DIFC Insurance Association; and Aftab Hasan, secretary general, Insurance Business Group, and chairman, Risk Exchange DIFC.
“It is going to be a very different Q3 when it comes to health business as there will be reduction in cost on the health side. There have been improvements in claims ratios,” Jaffer said.
Life insurance
“The market has changed and the customer need for life insurance has increased. It is obvious that the need for health insurance has increased and life insurance is being raised in terms of importance,” said Zurich’s Jopp.
The markets are recovering as far as reinsurance is concerned.
“Digitalisation may be good for motor and medical products, but when it comes to larger risks especially for those that require facultative reinsurance, the ability to survey a location and provide updated underwriting, information is no longer there,” said UIB’s Kabben.
“Going forward, what we as an industry need to learn is that we should not shy away from the risks.
“There will be much more interaction that we do today. But that does not mean that there will be more online distribution. The products are mostly corporate and SMEs.
“For SMEs, the products are more complicated that require more explanations. So we don’t see so much online activity. It does exist to some extent on the retail markets, but for high end segments, we see more interactions where people are looking at the kind of offer they like to buy potentially online, but end up buying offline,” he added.
Online activity
Online distribution is catching up, but selectively. The market is seeing greater demand from customers for more activity online.
Similarly, intermediaries, banks, brokers and investment consultants are asking for technology that can help them make the job easier, quicker and more efficient.
“In the retail space, we are seeing increase in direct sales through online capability, so we launched a couple of products. As far as life insurance is concerned, in terms of aggregated sites, we are long way from other markets in Europe and North America,” said Jopp.
There was consensus that digitalisation has taken a significant lead during the pandemic and technology has been a huge enabler for the industry.
“Digitalisation can reduce cost that can hopefully be passed on to the consumers. The trend has started well before covid, but it just got accelerated during the pandemic,” said Cigna’s Droesch.
Medical and motor
When it comes to the medical line of business, because of the elective surgeries were postponed, there is claims improvement.
The covid-19 effect has seen companies that are providing basic coverage to the blue collar workers under Dubai Health Authority (DHA) estimated to have claims worth AED300m (£64m, $82m, €71m).
Meanwhile, motor premiums are going down primarily because of refunds or the extension of the duration of the coverage. Overall premiums are going to fall, at least in the short term.
“Insurance companies have been affected by the capitation regulation, although there has been an understanding that it is not explicitly permitted, but implicitly tolerated. We see that some of the insurance companies, that are practising the capitation model, are actually having an impact,” said Jaffer.
There have been hit on investment income for companies with exposure to equity markets, and properties.
Recovery, but not yet
The insurance industry in the UAE has not been as deeply affected by the crisis as other sectors, and it has been seen as the mitigator of economic challenges.
There is less chance for a recovery in 2021; a recovery might happen in 2022.
The moral of the story is that you need to be efficient and need to add value. Bringing regulatory environment backed by clauses and standard practice and all are aiming to bring trust and confidence in the insurance sector.
“We are re-evaluating how we do business in the context of the new landscape and ever challenging operating environment in the wake of the pandemic, and resolving to work with all stakeholders to deliver a market that works well in the interest of the policyholders,” said Insurance Business Group’s Hasan.
