After years of steady growth, and a phenomenal recent double-digit surge, the Saudi insurance market is demonstrating signs that it is entering a transitional phase. This has yielded an increase in the number of insurance companies in the Kingdom, and offers significant opportunities for international investors to meet the needs of the market and further penetrate the sector. Government spending on infrastructure, the strong macro-economic performance – with a high GDP – and the dynamic, fast-growing population of 28.4m are the main contributors to creating a stronger demand for insurance, with gross written premiums (GWP) reaching SR18.5bn ($4.93bn) in 2011, a 12.9% increase from SR16.39bn ($4.36bn) in 2010, compared to a 12% growth rate in 2010.
The market is progressively moving toward innovative products and value-added services that are supported by data-driven technology solutions. Competition between Saudi insurance companies has compelled many players to upgrade their products and services, as opposed to engaging in price wars to aggressively fight for market share. Regulators are also taking steps to focus on improving enterprise risk management, with a substantial focus on solvency regulations and effective corporate governance. These advancements indicate a growing sophistication of the sector.
The current market conditions provide Saudi insurers with the opportunity to boost market penetration and strengthen the following fundamental metrics: strategic management; human capital and organisational development; product development; distribution channel development; operational effectiveness; customer service; and technology.
The integration of the aforementioned segments will ultimately allow for setting improved operational benchmarks to regulate, condense and optimise the domestic market. With a number of Saudi insurers currently rated at “BBB” or above by credit-ratings agencies, the market is already beginning to experience strong capitalisation, in addition to improved investments and a competitive position among numerous Saudi-rated insurance companies.
Investing in human capital and organisational development is considered to be a strategic imperative to attract competent staff and management that possess the creativity and experience to maintain growth.
The current trajectory of the Saudi insurance market is a consequence not only of the existing favourable business environment in the Kingdom, but the ability of Saudi insurers to incorporate agility and innovation into their corporate cultures. Reinventing operating models to permanently expand customer access to competitive products and services, as well as creating efficient operations enabled by technology, has optimised the model and effectively managed risks. The market has witnessed a profound transformation of Saudi insurers’ operating models toward crafting innovative and effective strategies. Operators are providing customised products and value-added services that target customer segments at the degree and intensity to sustain growth momentum and increase insurance density. This is measured in terms of GWP per capita, with an elevation in insurance density from SR604 ($161) per capita in 2010 to SR682 ($182) per capita in 2011, which represents a 14.6% rise.
This innovation culture has not only enhanced the previous standards of the Saudi insurance market, but has also ushered in profitable growth and a platform for further expansion in the medium- to long-term future. Indeed, the combination of leadership, creativity and strategic management serves as a catalyst to drive innovation forward and integrate fresh concepts and business models. At the same time, an innovation culture will facilitate the global positioning of the Saudi insurance market and accelerate penetration of the less exploited tiers of the population. Strategy continues to make inroads concerning output, enhancing efficiency and embracing dynamic, up-to-date technology. This undoubtedly supports the ongoing quest to position the Saudi insurance market at a global level.
