News
Insurance Uptake In GCC “Not Nearly Enough” – Analyst
| March 15, 2010 by Rob Morris
GCC premium rise fails to mask region’s comparatively low insurance uptake.
Insurance uptake in the GCC remains worryingly low, despite a rise in premiums that far outstrips the worldwide growth average for 2009, a global management consultant has claimed.
Value Partners revealed on Monday that premiums in the GCC climbed 28% to $10.6bn last year from 2008 – a huge gap compared to the 3.4% global average.
But Santino Saguto, managing director of Value Partners’ Dubai office, insisted insurance growth in the GCC was still not nearly enough.
“Insurance penetration, for example aggregate insurance premiums over GDP, stands at 1% for the GCC countries,” he said. “In contrast, the developed insurance markets in the US and Europe register penetration rates in the range of 5-15%. GCC giant Saudi Arabia has a particularly low penetration of only 0.6%, dwarfed in absolute size by its smaller neighbour the UAE, which has a penetration rate of 2%.”
The study showed that motor was the GCC’s most popular form of insurance, followed by health and property. In contrast, life insurance was the weakest, accounting for only 15% of the region’s total insurance premiums compared to 60% in Europe.
“GCC residents seem to buy insurance products only if they have to. It is not by coincidence that mandatory third party motor insurance is the leading class,” Saguto said.
“All other non-life insurance classes, health included, are almost 100% corporate business. GCC nationals expect their governments to cover most risks for them, the majority of health care is free and provided by the government, and home loans are often state-guaranteed, without the need for building insurance.”
Other findings from the report show that GCC markets have only recently opened their doors to foreign competition, with local insurers claiming 77-90% market share. Value Partners’ research also said some regulatory regimes were below world standards.
Regulatory reform, the rise of Islamic insurance Takaful and obligatory health cover in some GCC countries would contribute to future market growth, the report said.
