Interview: Mokhtar Naouri
What has been the impact of reduced oil revenues on the insurance sector?
MOKHTAR NAOURI: There has been a slowdown with respect to insurance projects that are linked to the oil and construction sectors. This slowdown started in 2015 and is clearly continuing through to 2016. Due to restrictions on automobile imports there has been a notable decrease in numbers of newly insured vehicles. At the same time, a decrease in volumes of new insurable goods and equipment is compensated for by the fact that the dinar has slightly weakened, and as a consequence imports now cost more.
Nevertheless, the insurance sector, due to the current constraints, will need to look to areas that have not been as integrated with the insurance sector traditionally. Key sectors where growth perspectives could be strong are small and medium-sized enterprises (SMEs), individuals (non-corporate) and agriculture, among others. However, to achieve growth, insurance companies need to do more in terms of communication, marketing and awareness. In addition, with Algeria attempting to reduce its import bill, local industry is set to grow. Domestic activity has diverse needs and will serve as a growth driver for the insurance sector.
Which reforms should be put in place with respect to corporate income tax (IBS)?
NAOURI: IBS can be an important tool to help businesses renew their financial resources. The solvency margin means that as an insurance company grows and has more premiums to pay out, it also needs to protect and increase its solvency margin. However, in the current circumstances, many companies are not anticipating their future capital needs and are instead distributing their earnings to shareholders. When insurance companies better anticipate their capital needs, they may be more likely to develop new insurance products. What I believe is best is to increase the tax on profits that are distributed as dividends and to reduce the taxes on profits that are reinvested. In doing so, this will encourage companies to invest more actively in internal activities that are drivers of growth, ultimately leading to a more dynamic insurance sector.
What strategies could further develop the insurance product offering for SMEs?
NAOURI: There are still a lot of efforts to be made in order to work more closely with Algerian SMEs. Both the insurance product offering for these kinds of firms and communication with them could be better. Furthermore, Algerian SMEs tend to have poorly envisioned plans for their own insurance needs, and this is an area that needs development so that insurers and insured parties can work together more effectively.
There are more than 30 insurance brokers in Algeria, and in the last five years the turnover for brokered insurance has grown ten-fold, from AD800m (€6.6m) to AD8bn (€66.5m). The insurance brokerage segment will continue to grow, and this can be a vector through which SMEs can be reached. Similarly, insurers themselves can complement the needs of SMEs by expanding their networks to be closer to them. However, there is a real need to develop a stronger culture of risk assessment and management with specialised firms and consultancies that can truly accompany SMEs in identifying their needs. In order to make insurance cost-effective for SMEs, we need to work to train local talent in risk management. We have people with great qualifications, but they need special insurance training to be able to consult on matters related to insurance.
Insurance companies also need to improve their image. This means that corporations need to make sure their clients are settled quickly. Perhaps most importantly, insurance companies should help customers identify ways to reduce risk. We also need to change the mindset that exists with some business owners, whereby they view insurance as an obligation, rather than as products with clear benefits and utility.
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