While the coronavirus pandemic has had a negative impact on Egypt’s insurance sector, the continued rollout of universal health coverage, alongside targeted expansion in particular segments, could provide potential for future growth.
The difficult economic environment caused by Covid-19 has led to a reduction in demand for insurance throughout the country, which had low penetration levels even prior to the pandemic.
According to the Insurance Federation of Egypt (IFE), the number of new insurance products sold dropped by around 10-15% year-on-year over the period between the outbreak of the virus in mid-February and mid-July.
Meanwhile, given the financial challenges facing much of the population, the rate of customers paying premiums has also been negatively impacted, as consumers prioritise essentials such as food and medicine over insurance.
In terms of specific segments, there has been a notable decline in demand for travel, automotive and life products in particular during the pandemic.
Elsewhere, takaful (Islamic insurance) providers are expected to see their profitability affected both by Covid-19 and by new agency fee regulations, implemented in February by the Financial Regulatory Authority (FRA), which include a 25% contribution fee for life insurance companies and a 30% fee for property insurance companies that use the FRA’s agency system.
Health insurance opportunities
While the sector has faced a series of challenges in recent months, the country’s rollout of universal health care could provide an avenue for growth in the medium to long term.
Following the launch of the pilot programme in Port Said in July 2019, the universal health care scheme has since expanded to Ismailia, Luxor and South Sinai, and is expected to be fully implemented nationwide by 2032.
The programme, which aims to provide coverage to the entire population, will be funded by a series of employer and employee contributions: employers will contribute 3% of a worker’s monthly salary into the system, while employees themselves will pay 1%, or 3% if they are covering an unemployed spouse.
The stipulation of mandatory coverage will provide significant demand for health insurance products, potentially increasing growth opportunities for insurers.
As yet, the precise role that private health insurers will play in the system is unclear. While the government announced in April 2018 that private players would be able to provide coverage through the system – sharing service costs with the government – a total breakdown of the roles and costs is still to be provided.
To support the continued rollout of the programme during the pandemic, which affected government revenue, the World Bank announced in June that it had provided the Egyptian government with a $400m loan.
Digitalisation and micro-insurance
Aside from the expansion of health insurance, insurers are looking to digitalisation to bolster growth.
“There has been a move increasingly towards digital transformation, and insurance companies are making considerable efforts to prioritise the adoption of new technology, to the extent that the current crisis has accelerated this trend into 2021,” Mohammed Omran, the chairman of Egypt’s Financial Regulatory Authority, told OBG in an interview in July.
As in other emerging markets, insurance companies are increasingly updating their online offerings and digital platforms to facilitate access for customers – amid growing awareness of the importance of health coverage.
For instance, in May Kuwait’s Gulf Insurance Group (gig) purchased a $4.25m stake in the UAE-headquartered insurance and finance comparison website yallacompare, which has a significant presence in Egypt.
In a statement announcing the deal, gig said that the acquisition was key to the company’s digitalisation strategy, and that it had further plans to expand its digital offering.
Elsewhere, innovative products such as micro-insurance – which typically constitutes small-scale, affordable insurance products – are expected to be key drivers of insurance growth moving forward. These will go some way to closing the country’s insurance protection gap, estimated by the IFE to total $2.8bn.
“We believe that micro-insurance is the main way to boost inclusivity, alongside closing the protection gap and increasing the uptake of digital technology,” Omran told OBG.
“Micro-insurance is complementary to many financial products for marginalised and underserviced populations, so it is a necessary part of the government’s efforts to achieve financial inclusion.”