Navigating Trends & Opportunities in UAE’s Broking Industry: Gargash Insurance

gargash insurance- insurance brokers- insurance trends- UAE 14 Mar, 2024

Explore the changing landscape of the broking industry in UAE with exclusive insights from Gargash Insurance's Executive Director, Mr. Suresh Nair, featured in 'Middle East Insurance Review' magazine.

Read this interview of our Executive Director, Mr. Suresh Nair, with Middle East Insurance Review, to know more about the insurance broking sector's post-pandemic recovery, and the transformative impact of InsurTech on the positive trajectory.

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The outlook for the broking sector in the UAE is good, compared to the preceding couple of years following the pandemic. “It will be seen as the year in which the industry emerges once again from the COVID-19 shadow,” said Gargash Insurance Services executive director Suresh Nair.

Topline growth and robust recovery from the pandemic

“Overall, the insurance industry in the UAE has shown growth reflecting the strength of the underlying national and regional economies. Most insurance companies have registered top line growth indicating a robust postpandemic recovery,” Mr Nair said. In the UAE, apart from the process of making medical insurance mandatory in Abu Dhabi and Dubai in the last decade, other major initiatives include the introduction of the workers protection programme initiated by the UAE Ministry of Human Resources and Emiratisation and the unemployment insurance scheme.

Mr Nair said these schemes have opened new areas for insurance penetration, although the two latter programmes are directly managed by insurance companies without the intervention of any broker. As the market matures, there is considerable pressure on margins for insurers due to increased competition. In parallel, increases in operating costs are noted due to the need for both investments in technology and keeping pace with regulatory changes and compliance requirements. Mr Nair said the insurance broking industry also reflects the same trends. “While on one hand there are growth opportunities for professional brokers with focus and strategy, it is necessary to manage cash flows and have sustainable operations. The Central Bank of UAE which now regulates insurance activities has also emphasised the need for increased employment of UAE nationals as part of the Emiratisation drive with targets for each firm,” he said. In the life sector, Mr Nair said, the regulations termed as BOD 49 (board of directors’ resolution 49 of 2019) came into effect in 2020. These were introduced to increase transparency, reduce costs and incorporate more flexibility for consumers. “Among other things, it also capped broker commissions. The short-term adjustment pains were apparent but the medium-to-long-term effects are expected to be beneficial to all players not least the consumer,” he said.

Increased digitalisation

Emerging from the pandemic, one of the issues brokers faced was an upsurge in InsurTech and online platforms, Mr Nair said. “Many personal lines products like motor, travel and home were made easily available to consumers and they became more inclined than before to purchase these products online. This meant a rapid transformation phase to ensure such channels are part of the consumer offering for insurance entities to stay in the game,” he said. As a general trend, products like personal motor, travel and home are increasingly becoming more commoditised with higher levels of digitalisation. Price comparison websites and aggregators, apart from direct digital selling by insurers have made inroads into the broker business. “This meant that brokers had to move up the value chain in terms of providing real value to the customers apart from merely assisting in sourcing products,” he said. Another challenge Mr Nair mentioned was the proper management of credit risks. “Careful monitoring of receivables mean that considerable resources need to be allocated for this purpose,” he said.

More time and resources needed

When asked about how the role of a broker has changed over the years, Mr Nair said that new insurance regulations in the UAE spell out the responsibilities of a broker to the customer and towards insurers. “It has been made clear that consumer protection, transparency and best in class international standards is paramount for the UAE insurance industry. Various compliance guidelines and regulations are being issued at an increasing pace to reach these objectives.”

“This means a relatively greater amount of time and resources must be committed to compliance than earlier years,” he said. Measures taken by the regulators to protect consumer interests, prevent mis-selling and ensuring professional standards in the market also led to brokers, who did not anticipate the change, stepping up to comply very quickly, Mr Nair said. “The majority of the brokers in the UAE had no problems with realigning to the requirement and I would say there has been a positive effect as selling has become more ethical and professional,” he said.

M&A options have become more attractive

“With the effect of introduction of mandatory medical insurance plateauing due to a maturing market and general increase in intensity of competition, organic growth is not always sufficient,” Mr Nair said. In such scenarios, M&A options have become attractive. “We have seen activity in this area both for insurers as well as insurance brokers. For international players, an entry into the UAE market with its inherent strength and growth potential is very attractive. In return, international companies can bring in their financial strength and technological competencies which is sought by local entities,” he said.

Largely a buyer’s market Mr Nair notes that the soft market conditions specially where net local retentions are high. In areas that are primarily reinsurance dependent, pricing and terms can be harder to deal with. These include cyclical variations in property coverage for high rise cladded buildings, standalone warehouses in loss prone areas; medical malpractice; professional indemnity for some types of professions and more.

Anticipating a positive economic outlook

“Clearly, there is a lot bubbling in the pot. Apart from the regulatory requirements mentioned above, we are also looking at the effect of insurance companies fully coming under the IFRS17 regime,” he said. Despite the volatile international geopolitical situation remaining a concern, solvency requirements in certain situations requiring additional infusions of capital and the newly introduced corporate tax kicking in this year, Mr Nair said “the UAE still anticipates a very positive economic outlook. The underlying economic policies are sound and the infrastructure – digital and otherwise are world class.”


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