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Insurance penetration is below 2 per cent in GCC

Lack of awareness and the transient nature of expatriates hinders sector’s growth

  • By Cleofe Maceda, Senior Reporter
  • Published: 15:58 March 19, 2013
  • Gulf News

Dubai: The lack of awareness and the transient nature of expatriates are key factors linked to the very low levels of insurance penetration in the Middle East and North Africa (Mena), experts told Gulf News.

The Ernst & Young’s Global Insurance Consumer Survey 2012 reported that insurance across the region remains underdeveloped, with penetration rates pegged below 2 per cent in almost all GCC countries. Life insurance, in particular, is nascent, accounting for less than 20 per cent.

Some experts said people’s cultural and religious reservations have something to do with low insurance penetration rate, but Ashok Sardana, managing director at Continental Group, disputed this, saying that only a very small percentage of the population considers insurance non-Islamic and there have always been Sharia-compliant solutions to cater to this segment.

“More than anything else, it is lack of awareness of the benefits of having insurance. Most people think they are insurance-proof and if something were to happen, it would happen to their neighbour,” Sardana told Gulf News.

“Another reason is that the majority of the population here consists of expatriates who come here on short-term contracts and are not very comfortable with the idea of spending on insurance, savings or protection plans,” he added.

The Qatar Financial Centre Authority Mena Insurance Barometer released this month noted that despite the macroeconomic dynamics of the region, insurance premiums in Mena account for only 1.3 per cent of the GDP, a fifth of the global average. In other countries, the figure reaches 10 per cent.

Dr Kai-Uwe Schanz, partner and chairman of Dr Schanz, Alms & Company AG, said the penetration ratio in Mena should be much higher, as the average GDP per capita in the region is close to the global average. Schanz said GDP per capita is the “biggest single driver of insurance penetration”.

“The penetration gap is attributable to cultural/religious reservations vis-à-vis the notion of insurance and the fact that, in a number of countries, governments are still the ultimate absorbers of risk which reduces the need for ordinary people to take out insurance,” Schanz said.

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