Amid price rise and inflation, insurance plays a crucial role in mitigating risk and providing peace of mind to individuals and businesses, say industry experts.
“Insurance is a risk transfer,” explains Mustafa Oliyath Vazayil, Managing Director of Gargash Insurance, one of the UAE’s leading insurance intermediaries. “For a fixed amount, you're transferring the risk in case of loss or calamity to somebody else so that in event of something happening, you’re given compensation.”
The value of transferring such risk and getting compensation is that much more significant when costs are soaring. For instance, repairs or rebuilding after a household or warehouse accident becomes a far greater financial burden when everything, from the materials needing to be replaced to the labour required, is more expensive.
Role of insurance brokers
Creating this sort of awareness among individuals, SMEs and larger corporations is the role of insurance intermediaries such as Gargash Insurance. With 30 years of experience in insurance broking and risk management in the country and as the first national insurance broker in the UAE to be accredited by Chartered Insurance Institute (CII), London, Gargash Insurance is uniquely positioned to help its clients with their specific insurance needs in the UAE.
“We help businesses understand their potential areas of risk exposure and then we give them a recommendation based on which they make a choice,” says Vazayil.
“This is not a one-off situation. Businesses are dynamic, so as insurance brokers we need to be in regular touch with clients to make sure that they're not caught unawares.”
Beyond major insurance considerations such as property insurance, there are a whole gamut of others that business owners need to be aware of, from cybercrime insurance to employee dishonesty insurance.
“Every year, we go back to the client, saying ‘we think you need to look at these possibilities’. The client may still decide, ‘I can take the risk. I will bear the losses’, or [they might think] it won’t happen to me, it will only happen to the other guy,” he says.
Increasing awareness
But awareness about the need for insurance is growing in the country, according to Vazayil. This is in large part due the financial shocks people have personally experienced and have seen others experiencing during the post-pandemic period and is in keeping with recent findings by the Geneva Association, a leading international insurance think tank, that such shocks sharpen risk awareness.
“People are learning, not just from their own experiences but from their friends, and from the business community at large,” he says.
For instance, people in the UAE have become more aware of the need for comprehensive insurance coverage for their cars, especially since the heavy rains earlier this year. “We see far fewer people insuring their high-value cars on a third-party basis only,” explains Vazayil. “Those who have bought third-party insurance are also looking at enhancing their cover.”
Medical insurance
This change is especially visible in the health insurance sector, which is now the fastest-growing class of insurance in the country. Partly it is due to the UAE government making it mandatory. The latest initiative is in the northern emirates (i.e. Sharjah, Ajman, Umm-al-Quwain, Ras-al-Khaimah and Fujairah) where the private sector employers must provide mandatory health insurance coverage to their employees (to be enforced from January 1, 2025). It’s also because general awareness is increasing and there is more acceptance in the UAE of its necessity, says Vazayil.
This again aligns with the Geneva Association report which finds that in times of price rise and inflation, the knowledge that one has insurance coverage and can therefore afford medical or dental treatment is invaluable for peace of mind.
However, one aspect in which both awareness and availability needs to increase is the case of older residents who are choosing to stay on in the UAE after they retire, according to Vazayil.
“Dubai is becoming a retirement destination,” he says. “Since there is no public medical care here, people have to buy medical insurance. Many don’t understand the necessity to budget for decent medical insurance ahead of time. They say, ‘every year I pay just Dh1,000 for doctor visits. Why should I pay Dh5,000 for insurance?’ But one illness can change everything. Equally, the providers should design the right type of products for this segment.”
In certain instances, insurance, bought early, before they are at a higher risk for lifestyle-related ailments and therefore higher insurance premiums, can cushion these individuals against the fallout when ill-health hits.
Future of the industry
To ensure that customers are served optimally during this period of price rise, insurers and brokers in the region are turning to the latest AI and data analytics technology, according to Vazayil.
“The insurance market in the UAE and the GCC as a whole is starting to adopt Insurtech – analytics has improved, and more automation is coming into the service sector,” he says. “Gargash has always been a leader in in use of technology for customers, and we’re continuing to improvise and innovate.”
