What’s Next for MENA Region Insurers?

The insurance industry needs to be adaptable to thrive in uncertain times

The past couple of years have brought about tremendous change in nearly every industry across the MENA region. On the global scale, companies that have done well for decades have had to reassess and realign their strategy as consumer trends have evolved, and disruptive technologies have entered the market. Dominating the marketplace and effectively reaching customers has become increasingly challenging across the board; however, what about the insurance industry?

The insurance industry has experienced significant changes, especially in the MENA region. Stagnant economic growth levels, political turmoil, increasing unemployment levels, and Corona are primarily to blame for this market landscape; however, steps are being taken to alleviate these pressures and spur economic growth again. There are also several more factors at play besides the overarching financial situation, and this is what we need to focus more on today:

Challenges

One of the biggest challenges within the MENA region for the insurance industry is the slow sector development, especially in corporate insurance and risk mitigation sectors. There is a chasm between what companies are demanding and what the industry can currently handle as a whole, particularly when it comes to multinational corporations operating across the region where trade and cross-border risk issues arise. Another significant challenge in the industry is that the retail customer base has evolved, changing what’s expected by providers.

Predicting trends and assessing economic behavior is paramount, moving forward as an industry in the region. Not only will this keep us current, but it will allow us to meet consumer expectations and grow the demand far beyond what it is now.

In the coming years, niche insurance, as well as online purchasing and quoting, is only likely to rise, and insurers must be prepared with the technology to move away from the traditional means of doing business. Opening these channels up to consumers requires significant investment. With few providers in the region going online and even fewer qualified professionals to keep up with new product demand, the market, in its current pace, will not be able to keep pace.

Opportunities

Though there is a fair share of challenges presented to the industry, these challenges also offer opportunities for growth. Due to the widespread shift in demographics and a growing population, there is an increasing number of those interested in risk mitigation through the means of insurance. Two of the main areas of opportunity to pursue the steadily increasing number of potential customers are digitization and the region’s low market penetration.

Studies show that the number of online car insurance sales increased tenfold since 2016 in the UAE and one year alone from 2017–2018, there was a robust 11% increase in internet users in the region. With most MENA countries holding a strong nearly 100% smartphone market penetration, it’s not difficult to see where the market is headed. Entering the digital space is quickly becoming an advantage, and numbers are only expected to rise exponentially in the next few years.

Along with a rapid increase of usage in the digital space, market penetration of insurance is expected to grow by leaps and bounds. In a study conducted throughout the Middle East, it was found that 93% of participants expect stability or an increase in insurance market share this year. In part due to the current low number of competitors, as time goes on, product awareness, coupled with the availability of services, has the potential to create a boom and allow for new enterprises to enter the market space quickly, ultimately increasing demand.

There’s a growing market here, it was once about developing awareness, but now, the weight has shifted from customers to insurers. Either it will rise to meet the demand, or MENA insurers will fall behind, and foreign entities will gain the advantage over the marketplace.

The Lloyd’s Example

Despite the challenges and opportunities, overcoming them and thriving in this new sector environment is possible. An excellent example of resilience and self-reflection can be seen in Lloyd’s of London.

Having been a leading policy provider since 1686, Lloyd’s has stood the test of time and adapted well to the ever-changing market. 2019 was certainly no different as several issues surfaced, chiefly the professionalism of the company and the growth of the market. Upon the realization of these issues, they became a pivot point and have since affected change throughout the structure of the company.

Pivoting

Lloyd’s has always paid close attention to its customers and has continuously led the charge as the industry example when it comes to market adaptation. They have pushed the envelope even further this year with a renewed commitment to growth. Construction of their Product Innovation Center was a chief cornerstone of their mission, creating a space to trail new products made for complex risk. Another main area of improvement and one of the most long-term strategies has been the development of current and local talent. In creating these changes, ROI has increased, and the successful continuity and overall reassurance in the industry.

In Conclusion

Based on the current market situation in the Middle East, it’s easy to see that there are some significant gaps. From slow sector development and a changed customer base to missed opportunities in digital and overall market penetration, challenges are beginning to rear their heads at a rapid pace. Fortunately, we can use Lloyd’s example as one of many, to see that it is possible to overcome this current fluctuation and thrive in the MENA region as an industry.

Moving forward as an industry, the hope is that MENA insurers will rise to meet the demand. Not only will this increase economic opportunity but it will ultimately bring sustained growth throughout the region.

To carry this conversation further, join us on our LinkedIn page or email us at clarity@insurewithpetra.com — We enjoy discussing the latest insurance trends and learn from them so we can provide all our clients the insights they need to protect themselves.