MENA insurance markets experiences a shifting landscape
Four-pronged disruption affecting MENA insurance markets: increasing customer expectations, regulatory changes, technological advancements, and economic pressures.
According to EY’s latest report, ‘Insurance Opportunities in the Middle East’, insurance markets in the Middle East have remained resilient despite economic headwinds and lower oil prices. Two of the region’s largest markets, the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA), have hit the $10 billion gross written premiums mark—underlining the region’s increasing significance to the global insurance markets.
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. Whilst we see pockets of growth, how individual insurers respond to these emerging challenges, will define the future leaders of the business.”
However, 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.
Seven insurance trends are expected to drive the MENA insurance markets in the near future, including: Value Added Tax (VAT), IFRS, Robotics, Analytics, Digital, Technology, and Cyber.
Shaun Crawford, EY Global Insurance Leader, added, “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 KSA 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.
“Having witnessed the trends from a number of emerging markets over the recent years, we see Middle East markets 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,” explained Rohan Sachdev, EY Global Insurance Emerging Markets Leader.
Sharing similar sentiments, 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”.
While much progress has been made, a key outcome of the current competitive environment as a result of increased regulatory requirements, is likely to be increased pressure on small insurers leading to consolidation opportunities, which is already evident in the KSA market.