Long March Ahead

What do the changes to regulations in the Saudi insurance industry mean for the overall sector?

The government promotes the insurance industry to keep the financial sector in general and the insurance sector in particular healthy and ensure sustainable, profitable conditions. These strategic efforts, driven by Vision 2030, aim to increase the sector’s overall contribution to GDP. Government regulators are laying down proper operating conditions and infrastructure for insurance companies while promoting customer-centric principles that bring sustainable protection for citizens. As insurance companies, we must encourage more product diversification and awareness in support of the same purpose. The regulator wants to see increased levels of customer satisfaction and efficient settlement of claims as these will contribute to boosting confidence in the sector.

Is the sector bound to witness more mergers and acquisitions or is it a premature trend given the low penetration?

“Horizontal mergers” help newly constituted firms increase their economies of scale, thus better positioning the organization’s ability to cover insurance risks. These merged insurance entities will have a larger combined portfolio with increased capabilities to handle and sustain varied products, and their market share will increase as a result. Hence, mergers will serve the economic goals that both regulators and the government hope to achieve.

How has UCA’s risk appetite evolved in the last few years, and how does this evolution reflect the trends in the local insurance market?

Supported by the government’s regulations and the enactment of compulsory medical and motor insurance, the market has expanded exponentially. According to the regulator, the measures implemented to date have resulted in excellent growth rates. The sector’s volume has increased from SAR5 billion to around SAR36 billion, and the number of people employed in the insurance sector has increased from 5,000 to 11,000. Moreover, the nation’s promising macroeconomic environment has helped enhance the maturity and technical capabilities of participating firms. UCA’s risk appetite has further evolved to better insure risks with higher capacity due to its demonstrated lengthy experience in engineering and motor TPL products, as well as its extensive partnership with expert reinsurers in the last 40 years.

To what extent is Saudi Arabia a price-driven market, and what is the key to increasing the insurance penetration rate?

The Saudi insurance sector is price driven at this stage. Unfortunately, there is a knock-on effect in response to insurance products being defined as compulsory. In such a situation, insurance companies tend to pay less attention to awareness and marketing as well as diversifying and differentiating their products and services from those offered by their competitors. Consequently, consumers start focusing on price as a key differentiator. However, clients today now place greater value on service delivery as awareness levels increase. Insurance companies have a great responsibility to diversify and differentiate their products by re-thinking their marketing activities.

To what extent can Vision 2030 support the growth of relatively subdued insurance lines?

Vision 2030’s ambitious goals are promising for the insurance industry, as they aim to stimulate investment in previously nonexistent new sectors, entertainment being a prime example. The challenge is for insurance companies to embark on a transformation program to promote agility in innovation. A key focus is digital transformation, which is no longer an option. Insurance companies must be able to respond faster and stay ahead of the curve by developing and marketing products that appeal to consumers in this nascent market.