Industry experts believe that the new regulations passed recently by the Insurance Authority are expected to expand life insurance coverage in the UAE, which currently has low take-up rates.
Frederic De Melker, RAKBank’s managing director of personal banking said during a webinar that, “Life insurance penetration is very low in the UAE. In 2018, it was 0.67 percent. In contrast, coverage stands at 30 percent in Luxembourg, 16 per cent in Hong Kong and 10 per cent in the UK.”
The global average for life insurance coverage is 6.1 percent.
Mr. De Melker added that the UAE is substantially underserved in terms of life cover as a large majority of expats come from areas in Asian countries where penetration rates are even lesser than in the Emirates. These include nations such as Pakistan, the Philippines, Bangladesh and China, while India has a take-up rate of 2.7 percent.
UAE-based RAKBank said the emergence of the coronavirus pandemic has resulted in a rise in the number of people considering life insurance policies.
Peter England, CEO of RAKBank said, “From March through to June, the number of people searching for life insurance on Google has gone up by more than 50 percent globally because of COVID-19.”
The new life and family takaful insurance regulations of the UAE Insurance Authority, which came to exist on October 16, limited the total commission payable on a policy over its lifespan, designated a mandatory 30-day ‘free-look’ period for a policy and increased disclosure requirements for financial advisers.
“The new regulations will protect the customer, make the insurer and the intermediary more responsible and operate in a transparent and customer-focused manner. Although the brokerage industry will experience short-term disruption, most independent financial advisers started to develop the appropriate infrastructure many years ago to face the impact of a significant reduction in income. They will try to build a more efficient organization and build sustainable streams of income. The future is bright for distributors and insurers.”
Poor awareness, lack of market confidence and the fleeting nature of expatriates are the reasons for the UAE’s low insurance infiltration.
Mr. De Melker added, “Until recent regulations were passed, all financial products were treated with suspicion. We have all heard of people being mis-sold schemes by aggressive salesmen. We welcome the new regulations which guarantee openness in terms of low charges and transparent pricing.”
The insurance market of the UAE is also preparing for some mergers, with consolidation in the banking and other financial services sectors underway.
“There are way too many insurance companies in the UAE. As the market evolves and digital transformation takes place, scale becomes crucial. This will lead to more consolidation among general players,” stated Mr. England.
Mr. Mazarakis also added that the growing number of insurers could lead to more consolidation to attain the scale and efficiency needed.