Innovation drives transformation in the UAE insurance sector
Insurance companies stay ahead of trends and meet the ever-changing needs of policyholders
Amid rising premiums and claims, coupled with global economic volatility, the insurance industry in the UAE is experiencing significant shifts. However, in the face of these challenges, companies are capitalising on new opportunities presented by mandatory health insurance coverage, unemployment insurance, population growth, technological advancements, and evolving consumer behaviour.
This resilience is reflected in projections by the UAE-based investment banking advisory firm, Alpen Capital, forecasting a steady growth trajectory for the UAE’s insurance market at a rate of 4.9 per cent between 2023 and 2038.
Similarly, the robust performance indicated in the Central Bank of the UAE’s (CBUAE) Quarterly Economic Review also highlights the strength of the insurance industry. Its fourth quarter review, released earlier this month, showed that the gross written premium increased by 12.7 per cent year-over-year in Q4 2023 to Dh53.2 billion, primarily due to an increase in health insurance premiums by 16.5 per cent and an increase in property and liability insurance premiums by 18.9 per cent. As of now, the insurance sector in the UAE consists of 23 traditional national companies, 10 Takaful national, and 27 foreign companies.
Rising premiums – a critical concern
While the insurance sector is experiencing growth, industry experts recognise the issue of rising premiums. Neeraj Gupta, CEO, Policybazaar.ae, emphasises the challenges posed by rising premiums for individuals and businesses.
“Individuals may face higher out-of-pocket expenses and need to take a meticulous approach to selecting insurance plans. Businesses, on the other hand, may need to adjust employee benefits or explore alternative risk management strategies to navigate the rising cost of employee health insurance.”
Gupta stresses the importance of finding innovative solutions to address this issue for a sustainable and healthy insurance sector.
Sustainable and scalable technology can be expensive, but the long-term rewards far exceed the short-term investment in terms of cost reduction and superior product offerings and service.
Gautam Datta, CEO of Watania International Holding, highlights the role of operational efficiency in keeping premiums low. “Inflationary pressures, rising insurance claims combined with inadequate pricing and strains of reinsurance capacity in key portfolios like health and motor, have put upwards pressure on premiums,” he explains.
Datta notes that well-managed companies are mitigating these challenges by reducing costs through automation and better claims management to minimise premium increases. “Pricing changes should be based on a deep understanding of the market segment through research and data analytics to ensure that the demand pipeline is robust and the offerings are meeting customers’ critical needs and specific preferences,” Datta says.
Meanwhile, insurers in the UAE are employing several other strategies to mitigate the impact of rising premiums.
“One common approach is offering tiered coverage options, allowing customers to choose plans that best fit their budgets and needs,” says Avinash Babur, Founder & CEO, InsuranceMarket.ae.
“Additionally, insurers are focusing on preventive health programmes and maintenance initiatives to reduce the likelihood of claims, which can help in stabilising premium rates. Loyalty programmes, discounts for safe behaviour, and continuous coverage are also used to maintain customer satisfaction and retention,” Babur says.
Embedding technology throughout the insurance industry is increasingly becoming indispensable for streamlining processes and delivering enhanced customer experiences. Additionally, advanced analytics are reshaping risk assessment and enabling tailored policy customisation to meet client needs. These strategic efforts are consolidating the insurance industry, positioning it to succeed in a digital landscape.
Tech shapes the future of insurance
“Insurtech innovations are leading to more personalised and dynamic pricing models,” says Babur.
“Technologies like telematics, for example, are used in auto insurance to offer premiums based on actual driving behaviour rather than standard parameters. Similarly, wearable technology in health insurance enables premiums and coverage tailored to individual health metrics and lifestyle choices. This shift is helping insurers manage risk more effectively and offer competitive pricing,” explains Babur.
Insurtech innovations are leading to more personalised and dynamic pricing models.
The insurance sector benefits from AI and advanced analytics systems, enabling it to make informed, data-centric business choices.
Michael Kortbawi, Partner at BSA Ahmad Bin Hezeem & Associates, a Dubai-based law firm specialising in key sectors including insurance and reinsurance, talks about the transformative impact of AI and data analytics on insurers. These technologies provide insurers with valuable insights that can be utilised to optimise insurance processes and explore new growth areas. AI models have the capability to forecast future scenarios, improve risk assessment accuracy, and refine pricing strategies.
These technologies provide insurers with valuable insights that can be utilised to optimise insurance processes and explore new growth areas.
Meanwhile, Gupta highlights the crucial role of AI and data in fraud detection and prevention, empowering insurers to effectively manage risk. “AI can analyse claims data to identify patterns and red flags indicative of potential fraud. This allows for faster detection and intervention, saving insurers significant resources and protecting honest customers from premium hikes due to fraudulent claims,” he says.
AI can analyse claims data to identify patterns and red flags indicative of potential fraud. This allows for faster detection and intervention, saving insurers significant resources and protecting honest customers from premium hikes due to fraudulent claims.
Similarly, advances in robotic process automation (RPA) and machine learning have greatly improved business processes within the insurance sector.
“Use of RPA and machine learning in insurance operations helps in carrying out many of the repetitive tasks at a fraction of the original cost and improve turnaround times and customer service,” says Datta from Watania International Holding.
“There is an increasing competition to provide superior customer service, from handling call centre requests to efficient and fast claims management and identifying fraud and abuse. Technology is critical to provide fast, simplified and efficient consumer service,” he says.
While the upfront investment is often substantial, insurance companies are convinced that the long-term benefits of adopting advanced technology outweigh the initial costs.
“Sustainable and scalable technology can be expensive, but the long-term rewards far exceed the short-term investment in terms of cost reduction and superior product offerings and service,” says Datta.
“Innovation is a necessity in our fast-moving industry and managing these investments in a manner that makes our business offerings more competitive is the key to growth and prosperity,” he adds. ■
According to Michael Kortbawi, Partner, BSA Ahmad Bin Hezeem & Associates, regulatory changes, market pressures, and the drive for efficiency are some of the key factors fuelling M&A activities in the UAE.
The recent merger of the Central Bank of the UAE and the Insurance Authority has raised regulatory standards, prompting further consolidation as companies pursue strategic acquisitions, explains Kortbawi.
The impact of M&A on the UAE insurance sector has been significant, resulting in improved regulation and increased deal activity. Additionally, it has facilitated market access for local and regional players seeking to acquire businesses, he says.
Trends in the reinsurance sector
The reinsurance sector in the UAE is witnessing significant changes. “The market is becoming increasingly competitive, with new players such as Hemsley Wynne Furlonge Partners (Middle East), MNK Re, Optio Re MENA, Swan Insurance Management Agency, Waica Reinsurance (DIFC), and YOA Risk Services entering the field. These new entrants are driving innovation and efficiency, leading to better products and services for customers,” says Dania Yassin, Associate, BSA Ahmad Bin Hezeem & Associates.
The market is becoming increasingly competitive, with new players entering the field.
“Moreover, significant transactions, such as the merger of conventional counterparts like NGLIC and RSA Middle East, GIG and AXA Gulf, are also impacting the landscape. These developments are reshaping the reinsurance sector, making it more dynamic and diverse.
“Staying ahead of the critical industry trends could involve leveraging data analytics to predict future market trends and make informed decisions. Additionally, exploring partnerships with international reinsurers could expand reach and offer customers the best possible solutions. This proactive approach can ensure a strong position in the evolving reinsurance market in the UAE,” explains Yassin.