Although Saudi Arabia has the largest insurance market in the GCC by far, its life segment remains underdeveloped. However, the years ahead may see greater focus on the line. Once life insurance begins to take off it should yield impressive results, as the Kingdom has both the volume and the wealth to be a good fit for this type of coverage.
Given Saudi Arabia’s cooperative insurance model, the entire industry must be sharia compliant. This requirement makes the Kingdom the largest Islamic insurance market in the world, according to the “Global Takaful Report 2017” by consultancy Milliman. However, this market is dominated by general insurance. In 2015 and 2016 life – which is called protection and savings insurance (P&S) by the market regulator, the Saudi Arabian Monetary Authority – contributed only 3% to total premiums, a figure that peaked at 6% in 2010. While Saudi Arabia accounts for around 43% of all non-life gross written premiums (GWPs) in the GCC, it accounts for only 8% of the region’s total life premiums. Furthermore, life cover in the Kingdom has the lowest percentage share of the total insurance market of any GCC country, according to Aljazira Capital.
Trends & Players
At the same time, the Saudi P&S segment has shown impressive growth recently. In 2014, for example, GWPs of life cover grew by 7%, reaching some $241m, followed by 14.5% expansion in 2015 for GWPs of $276m. The trajectory was more modest in 2016 – 1.5% – but this was still higher than the 1% of overall insurance sector growth.
According to a March 2017 report by Albilad Capital, 11 companies offered P&S policies in 2016, with the top three of these responsible for 63.9% of the segment. Those three were ATC (33.9%), SABB Takaful (15.7%) and Allianz SF (14.3%). The companies operating in the segment tend to specialise in life coverage – ATC’s portfolio, for example, is 100% P&S, while SABB Takaful’s is 85%. As the Kingdom’s cooperative insurance companies do not follow the takaful (Islamic insurance) model, complications arise when attempting to compare the global takaful industry with Saudi Arabia’s life insurance business. Insurers do, however, tend to offer takaful products in addition to their own sharia compliant services.
A number of constraints explain the low market share of P&S. Attitudes towards risk, a lack of awareness of a product and its benefits, and pricing often account for the level of take-up in an insurance market, with Saudi Arabia no exception. A 2016 survey by the College of Business at the University of Jeddah found that the main obstacles to Saudis purchasing P&S policies were a lack of knowledge and concern over whether or not such policies were truly sharia compliant. The current economic lull, a sense of job security and perceptions of the government social security system were also factors.
The Kingdom provides generous allowances and benefits, which for many removes the need for personal life insurance policies. This has resulted in the market being largely for non-Saudis, with group life policies covering employees in large corporations tending to dominate. However, the Kingdom’s long-term development plan, Saudi Vision 2030, suggests that the state is likely to play a smaller role in the future, leading the private sector to take on many of its current functions. This, plus the small size of the P&S segment compared to regional peers, has led to some optimism. While the market may be small for now, some see it as a sleeping giant.
Market penetration of life insurance in 2015 was 0.45% in the UAE and 0.24% in Bahrain, the GCC market leaders for this line. In South-east Asia the take-up of life cover is more expansive: 2.45% in Malaysia and 1.17% in Indonesia. This suggests a major growth opportunity for insurers willing to take on the task of promoting P&S, and showing Saudis that their offerings, too, are 100% sharia-compliant.