Forward Planning: Insurers need to adopt new marketing strategies

I was invited last week to attend a seminar organised by the Cooperation Commission for Gulf Insurance and Re-Insurance companies, an organisation responsible for the development of the insurance industry of the GCC.

The subject of the seminar was Insurance Marketing and the speakers were from all six GCC countries. The seminar covered a wide area of insurance marketing from the use of e-commerce and Internet in selling to the development of a marketing strategy in the GCC countries.

The papers were well prepared and provided a wealth of useful information. The speakers and the participants bravely discussed the existing insurance market with all its advantages and defaults and ways of improving it. In the past insurance companies in the Gulf area enjoyed having their secured market share, limited range of traditional products, known clients and profitable years.

Interest rate was much higher - the same applying to investment returns - and insurance operation profits were not that important. Wise underwriting and claim management were not that important either.

Competition between insurance companies is now at its highest and cutthroat tactics are very obvious on the marketplace. There are also over 150 insurance brokers competing within that same market.

At the beginning of 2002 in the UAE, some companies, which had followed a wise strategy in their insurance operations, have harvested the fruits of that strategy and declared good profits for last year operation. The hardest the market conditions, the healthiest insurance companies will have to be to prevail and survive.

In the UAE there are 47 insurance companies, which make the market a crowded one especially, considering that almost all of them sell the same types of products using the same distribution strategy.

Talking to the general manager of one of the most profitable companies about the secret of making profit in such a hard market, he said that he selects the risks to be insured and exercises a tighter control on his operation.

The same company entered recently into the medical insurance market and is very open minded toward developing new products and lines of business.

Of course feeling the losses pushes insurance companies to find ways to compensate by improving operations and building new marketing strategies. The participants at the seminar representing the insurance industry agreed on the lack of marketing capabilities of some companies.

Firms sometimes fear entering a new line of business like Life or Medical insurance. Most outfits only market products thus neglecting the actual needs of the clients. Using this strategy alone kept the market limited to selling the same traditional old products.

Pension and Estate planning hardly exist even among well-established life insurance companies. Professional Liability is an important coverage to many including doctors, lawyers, consultants and self-employed. Second To Die life insurance is an essential tool for estate planning and the protection of inheritance.

Long Term Care insurance will soon be a must for the terminally ill or the elders of the community guaranteeing a proper nursing home admission and service. Guaranteed secured pension products practically don't exist here and most people are forced to either put their retirement money in a bank secured deposit with a very small return which is lower than the rate of inflation, or to take risks and invest in the equity market without guarantees or even proper financial planning.

Marketing research companies are not giving the insurance market a fair deal by gathering the right information needed to develop insurance products or establish new lines of business.

For example the information regarding financial profiles of families in the UAE both nationals and expatriates: how much do they make and what they spend it on, how much do they save (if they do), do they invest and in what, how much the spending for food, clothing, housing, school tuition, cars, gas, and any other.

Also: how many parents age 35 years with an average of three children are living in a certain area in the UAE. Information centres with accurate data are very much needed, to provide such information that is vital for feasibility studies.

Institutions and service providers including marketing research, information database and direct mailing information companies could greatly help the insurance market to perform better and deliver what is needed.

The writer is managing director of Gulf Insurance Consulting and a licensed insurance consultant and financial planner.