Insurance and savings penetration will continue to rise in 2015 due to developing regulations and increased awareness about the importance of financial security, according to Nexus Group, the region’s leading insurance broker.
Community education and government enforced regulations are making savings and protection plans a priority for residents of the GCC, and a determining factor for job candidates when considering new career opportunities.
“Residents now have a better understanding of the protection that they need and that should be offered to them. Does my employer have a global health plan? Are they going to reward my loyalty to their company with an effective savings scheme? These are all questions that employees are beginning to ask,” said Tarun Khanna, Chief Executive Officer of Nexus Group. “When looking to recruit qualified talent, employers are now competing on benefits, and medical insurance is a key benefit,” he added.
Khanna said: “He expects other countries in the region, including Qatar, Kuwait, and Bahrain, to soon follow suit in mandating medical insurance because of the benefits it offers not only the employee, but also the government. By making coverage mandatory, it ensures that companies address the issue, and it reduces government liabilities – when people fall sick, they need to be treated regardless of cost, and now that responsibility is placed on employers.”
The existing levels of insurance penetration in the region presents great opportunities for industry growth, Khanna said. General insurance penetration currently stands at 2 per cent in the UAE, 2.3 per cent in Bahrain, 0.7 per cent in Qatar and 0.8 per cent in Saudi Arabia, according to the 2013 GCC Insurance Industry Report by Alpen Capital. The figures are far lower than the West, where insurance penetration stands at 8.1 per cent in the US and 12.8 per cent in the UK.
“However these rates are rising steadily, and progressing regulations coupled with increasing awareness and education will continue to push them forward,” said Khanna.
According to the Alpen Capital report, the insurance industry in the GCC is projected to expand at a compounded annual growth rate of 18.1 per cent between 2012 and 2017 to reach a size of $37.5bn. The life insurance segment is expected to grow at an annual average rate of around 2 per cent during this period. However, the non-life segment is forecast to expand at a much higher rate of 20 per cent annually, increasing its share in the regional market from 86.6 per cent in 2012 to 93.6 per cent in 2017. Figures from Nexus, which is the largest retail insurance broker in the region, show that their general insurance business is expected to grow by nearly 30 per cent in 2015. Similarly, the group estimates its life and savings business will grow by 25 per cent in the coming year.
“The region’s affluent population is more educated about the importance of saving and the potential rewards a carefully selected savings plan can offer,” said Khanna. “Their disposable income and the GCC’s tax-free market creates a favourable environment for saving, and I only expect the numbers to continue increasing,” he added.
The region will also witness growth in corporate savings schemes and pension plans, as more companies look to retain their employees by rewarding their commitment and dedication to the business.
“Overall costs of living are increasing — healthcare costs are rising and university tuitions are reaching an almost astronomical level,” said Khanna. “Residents are beginning to realize that to live sustainably, they must invest in a methodological savings plan, and companies are recognizing that to stay competitive in the market, they must offer their employees a compelling package of benefits. All of this further bolsters the growth of the industry,” he added.