Interview: Ebrahim Al Zaabi
What will be the key enablers for achieving further growth in the insurance industry?
EBRAHIM AL ZAABI: The insurance sector in the UAE has seen good growth rates compared to other emerging markets. The UAE insurance market has become the leading market in the Arab world since premiums totalled $8bn in 2013, marking 12.2% growth on 2012. The UAE insurance market is one of the most dynamic in the MENA region, recording the highest per capita spending on insurance services and also in terms of penetration. That said, further developing the penetration of the insurance sector is essential to the UAE’s diversification and growth of the non-hydrocarbons economy. For that purpose, fair competition must be ensured in the insurance market. This requires well-enforced legislation, which is the task of the IA, and will guarantee continued growth in this essential sector.
The three key elements in this expansion are economic diversification, population growth and an increase in tourist arrivals as a result of the World Expo 2020. These combined factors will cause the domestic market to expand and will force the UAE and its insurance sector to meet international standards.
Growth is set to double in various segments, especially in life insurance, where our initial estimates suggest that written premiums reached $2bn in 2013, a 14% increase over 2012. Ultimately, our aim is to develop policies that will spearhead expansion of the insurance sector in terms of size and contribution to GDP over the coming five years.
In what ways can regulation be developed to further stimulate consolidation within the sector?
AL ZAABI: Competition is the cornerstone of a free economy. The aim of a regulatory body is to protect the customer without compromising insurance firms, enabling them to continue obtaining positive results. Competition requires sound technical expertise for both national and foreign insurance companies. This is what is needed to improve the performance of the domestic market, as well as to increase awareness among customers regarding the best insurance services, prices and practices.
Our role is to encourage healthy competition between firms. This is not limited to insurance policy conditions and prices, but also includes service quality and a wide range of insurance products. The role of the regulatory body is to monitor unsound practices. Insurance companies need to comply with these rules for the sector to be able to compete internationally.
Mergers are always a corporate prerogative for shareholders and boards. However, the IA can provide legal and technical expertise, which may motivate companies. We are considering implementing new rules on capital adequacy ratios and have already introduced a new system for insurance brokers, which was issued at the end of 2013, and provides incentives to merge by providing technical tools. This is a key provision from the IA that is directed at small firms that cannot meet legal and regulatory requirements.
How can insurance and medical authorities work together to address concerns related to abuses in the health care sector?
AL ZAABI: Controlling the rise of health care costs means monitoring not only prices, but most importantly, the quality of service provided. The IA, in collaboration with medical institutions, exercises its supervisory role and investigates cases of abuse. Here is where insurance companies must also play their part, as they must closely follow rules regarding underwriting and calculate their premiums according to actual value and not with regards to the competition. This is their role, and it will help us establish minimum premium pricing by monitoring underwriting in the health insurance sector. We will evaluate the strengths and weaknesses of industry players and will help develop solutions to avoid future losses. The criteria for pricing coverage must be evaluated by qualified and experienced experts and included in the insurance contract.
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