GCC insurance firms battle pandemic woes

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  • Experts see up to 40 percent rise in premiums in the next two to three years.
  • Abu Dhabi-based Daman Insurance looking at new markets such as Kuwait and Bahrain.

It has been a roller coaster ride for insurance companies in the Gulf Cooperation Council (GCC) countries and the health care sector since the outbreak of COVID-19 in the region in March 2020.

While the healthcare industry has been stressed and had to be better equipped in its response to the spiralling COVID-19 cases in the first six months, the companies were hard-pressed as the claims rose substantially at a time when they were trying to reduce the costs.

The claims related to death and disability and medical bills among others while the challenges included adverse movements in the financial markets reducing profitability, business interruption and potential impact on their revenues.

On the other hand, the pandemic has turned out to be a blessing in disguise for the health sector as it gave a boost to investments in medical institutions managed by the governments as well as the private sector to meet the increasing demand. 

To cope with the burden on their revenues, the insurance firms have hiked the premiums in the UAE since the outbreak of the Covid-19 pandemic while merger and acquisition activity was witnessed in Saudi Arabia.

Hike in premiums

According to reports, the Chief Operating Officer (COO) of the Abu Dhabi based Al Wathba National Insurance, Anas Mistareehi, said that many health and life insurance companies increased premiums on their insurance plans last year by up to 20 percent.

“If market reports are to be believed, then the premium increase may continue to rise up to 40 percent for the next two-three years to come,” he added.

Chief Marketing Officer (CMO) at insurancemarket.ae, Hitesh Motwani, said that overall premium spends for customers for health insurance has gone up by 15-20 percent indicating that the residents have become more conscious about health and were looking for better coverage.

Besides increasing the premiums which led to inflation of costs, companies such as the Abu Dhabi-based Daman have been looking at new markets such as Kuwait and Bahrain within the GCC region. Daman is also holding discussions with strategic partners in Dubai and the Northern Emirates.

Saudi Insurance scenario

According to the Saudi Central Bank (SAMA), which regulates the insurance sector in the country, the annual turnover of the local insurers stood at US$10.32 billion in 2020 compared with US$10.09 billion in 2019. 

The Saudi insurance market is dominated by health activity with US$6.07 billion of written premiums, which represents nearly 59 percent of the total premium income. Set at US$369.09 million, the net profit recorded for all insurance companies grew by 61.5 percent in 2020.

The Saudi insurance sector comprising 29 firms also witnessed merger and acquisitions activity in 2020 to allow small insurers to raise capital. This also enabled the establishment of financial entities which offered innovative products. 

While Solidarity Saudi Takaful Company has been taken over by Al Jazira Takaful Taawuni Co, Gulf Union and Al Ahlia Cooperative Insurance have been merged and Gulf Union Al Ahlia has published a combined Financial Statement for 2020.

Saudi Enaya Cooperative Insurance and Amana Cooperative Insurance have signed a merger agreement on 29 April 2021. 

As per the pact, Enaya’s shareholders will hold 55 percent of the merged entity’s capital and Amana’s shareholders will receive the remaining 45 percent. The deal is pending approval by the shareholders and the competent authorities.

Walaa Cooperative Insurance and MetLife AIG ANB Cooperative Insurance in Saudi Arabia, which held discussions since September 2019 to merge, have finally completed the process in March 2020.

Digital platforms

With limited mobility due to restrictions to contain the spread of COVID-19, the GCC insurance companies have taken recourse to digital transformation which helped in improved efficiency and also cut down the operational costs. 

Paying premiums online and looking at new products offered by the companies have become the order of the day for the residents in the region.

One should not forget the success of the Dubai Health Authority’s initiative “24/7 Doctor for Every Citizen” telemedicine service which was launched in late 2019 much before the pandemic surfaced in the UAE. 

It has provided 83,000 telemedicine consultations from the beginning of 2020 to January 2021. Of the total consultations, 7251 were for COVID-19 patients and 13,437 were COVID-19 related consultations such as queries on vaccination eligibility, screening procedures etc.

Bahrain Insurance Association chairman Yahya Noor Ud Din said that the pandemic has helped companies in persuading people to use smartphone apps when conducting their transactions with insurance companies and interacting via the Internet.

“The boom in completion of transactions through smartphone applications has encouraged companies to invest more in this area,” he said.

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