Shifts in market dynamics reshape insurance in the UAE

In April 2024, the UAE experienced unusually heavy rains that led to widespread flooding across the emirates, a rare and disruptive event in a country typically known for its dry weather conditions. The rains caused significant property and vehicle damage, leading to a sharp increase in insurance claims. The spike prompted insurers to reevaluate their risk models, with many reassessing their exposure to weather-related incidents in the face of changing climate patterns.

“The unprecedented rainfall in April led to a surge in property and motor damage claims, at volumes that insurance companies were simply not used to. However, they mostly responded well, paying claims quickly and efficiently,” says Gautam Datta, CEO, Watania International Holding.

That said, the rains acted as a useful wake-up call for insurance companies, exposing gaps in their preparedness for large-scale claims following extreme weather events.

This incident also helped radically raise awareness of the importance of insurance coverage. “Anecdotally, we are seeing many motorists upgrading from third party insurance to comprehensive, many tenants are now considering getting contents insurance for the first time, and homeowners without buildings insurance now looking to buy coverage. Policyholders, in general, are checking the small print more carefully to see what risks are covered. These are welcome developments,” says Datta.

Amid the weather-related challenges and broader shift in the industry, the UAE insurance sector is implementing structural reforms to better address emerging risks. The UAE passed the Insurance Brokers Regulation a couple of months ago, which will come into effect on February 15, 2025. This move is set to strengthen consumer protection, improve market integrity, and raise industry standards in terms of service quality and financial stability.

Adjustments in the market

“The introduction of new regulations will have a positive impact on the market, ensuring that the solvency and financial stability of the insurance sector are more strictly monitored and rectified on an ongoing basis,” says Mustafa Oliyath Vazayil, Managing Director, Gargash Insurance.

He continues, “This is an effective way to drive the market, which was severely impacted by the 2024 rainfall, causing significant losses for many insurance companies and their reinsurers.”

As a result, the industry is undergoing significant adjustments. “The new regulation has introduced corrective measures, prompting insurers to closely reassess risk exposures. Pricing is now more rigorously analysed and applied, leading to increases in property, vehicle, and medical insurance premiums,” says Vazayil, adding, “This trend will likely continue, as it is crucial for the insurance industry to remain solvent and financially stable to meet its liabilities in the face of such challenges.”

Trends in health and life insurance

As these shifts continue to reshape the market, evolving consumer preferences are driving significant changes in the health and life insurance sectors. As people become more health-conscious and digitally connected, they are increasingly seeking policies that offer comprehensive coverage and better protection against unforeseen health issues or life events. “Consumers today want more than just pure life insurance policies. They are looking for life insurance coupled with health benefits such as access to telemedicine platforms, health assessments, or wellness promotion,” says Zubair Siddiqi, Head of Digital & Alliances, Zurich Middle East.

Hitesh Motwani, CMO & CDTO, InsuranceMarket.ae, also agrees, noting that customers now expect greater convenience, transparency, and value from their insurance providers.

“In life and health insurance, there’s an increasing emphasis on wellness-centric features and faster claim processes, with digital tools playing a critical role,” he says.

Demand for benefit-linked life insurance products is at an all-time high, as consumers seek plans that offer both essential coverage and the opportunity to achieve long-term financial objectives through investment-linked features.

Life insurance: A financial planning tool

“We see a shift towards flexible and benefit-rich life insurance products. There’s an increasing demand for plans that blend traditional protection with modern savings goals, particularly for children’s education, wealth creation and retirement planning,” says Dr Pradeep Mishra, General Manager, LIC International UAE.

Responding to this trend, LIC International has launched the Child Education Plan in the UAE, specifically designed to secure the future of policyholders’ children.

“We have also launched a popular plan blended with global market-linked funds to generate the higher investment yield through a systematic investment journey,” says Dr Mishra.

Term life insurance continues to be widely accepted in the UAE, says Siddiqi, as many consumers opt for these products to meet specific financial obligations, thanks to benefits like flexible coverage durations.

“Whole-life policies have also gained popularity due to their dual benefits related to life cover and investment opportunities,” Siddiqi says.

The demand for critical illness policies, particularly those covering chronic and life-threatening conditions, is also growing, as policyholders seek more comprehensive protection alongside their health insurance products.

“Customers are looking for policies that provide lump-sum benefits upon diagnosis of a critical illness, facilitating better financial management during crises,” says Siddiqi.

Vehicle insurance trends

In the motor insurance sector, the rise of electric vehicles (EVs) and the influx of Chinese car brands into the market are significantly reshaping demand, highlights Motwani.

“Insurers are working diligently to develop specialised solutions for these vehicles, considering factors like battery coverage, unique repair costs, and access to certified service centres,” Motwani says, adding, “This evolving landscape requires insurers to stay ahead by offering tailored policies and innovative coverage options that meet the demands of this growing segment,” Motwani says.

Digital transformation

Insurers acknowledge that technology, especially AI and data analytics, is transforming the sector by enabling the personalisation of insurance products. These advancements are not only enhancing customer experience but also allowing insurers to engage more effectively with clients, addressing concerns and tailoring solutions to meet individual needs. As a result, personalisation has become a major industry trend, driven by these technological innovations.

“By their very nature, personalised insurance products have a number of benefits compared to traditional products, mainly due to customisation and adaptability in fulfilling the needs of individual customers. When personal needs are taken into consideration, it makes customers feel special, and could result in deeper relationships with higher customer loyalty,” says Siddiqi from Zurich Middle East.

Launched in August 2024, Zurich’s Education Savings Plan (ESP) is an example of a personalised product gaining popularity in the UAE.

“Based on deep market insight that showed the need for specialised savings plans for children’s higher education, this initiative is designed to provide funds for higher education and deliver financial protection for parents against unforeseen events such as death or disability,” he explains.

While commenting on how technology is redefining the insurance landscape, Vazayil says, “We have seen a progressive increase in online business related to motor vehicles, a trend that will continue to grow in the market. What is even more interesting is the increasingly integrated approach between insurers, insurance intermediaries, and brokers. These entities are synchronising their platforms and communicating in real time, ensuring faster and more efficient service for clients. This area will see significant advancements, and my expectation is that by the end of 2025, the UAE market will be on par with developed markets.”

Technological improvements have also helped insurance companies to transition significant aspects of their services from traditional brick-and-mortar to online portals to benefit customers.

“With the automation of more tasks, efficiency is continuously improving. Also, with further advancements such as AI and machine learning, we will see a revolutionary approach to tailoring and personalisation of products at more accurate prices, based on ongoing data analysis and behavioural patterns. All this will bring even more benefits to customers,” says Datta.

Watania is currently in the process of developing a centralised AI and machine learning-driven data and business intelligence platform. “This will help us examine and analyse data across all levels and from different perspectives to deliver better operational efficiency, more transparency, and, equally importantly, provide highly personalised products to our customers at attractive prices,” Datta points out.

Data protection

Along with the rise of digital interactions comes the critical issue of data privacy and protection. To address this, insurance companies are implementing robust measures to safeguard the rights, confidentiality, and security of individuals, ensuring customer data is protected from misuse and breaches.

“We keep customers’ data completely secure as a top priority and have implemented robust mechanisms to do this, utilising the latest technology. This enables us to handle customer data with flexibility and confidence, which supports our provision of personalised services,” says Datta.

“Our multiple layers of data protection include firewall, anti-virus protected endpoints, data leakage prevention, mobile device management, network access control and regular security testing. We rigorously monitor possible breaches and recorded zero in 2023,” he adds.