The insurance industry in the UAE is relatively young. The oldest insurance company in the country is less than 50 years old. The Insurance Authority, the regulatory body, was established as recently as 2007 to protect the interest of consumers.
The industry is going through rapid change. By the end of this decade, personalized insurance covers will replace the one-size-fits-all products currently available. Most of this change is a result of the consumer shift toward digital channels.
E-commerce in the UAE is booming. It is currently at more than $16 billion a year and is expected to grow 23% annually for the next couple of years. This shift has opened the doors to digital distribution for the insurance companies.
Consequently, sales through the digital channel on web platforms run by brokers, insurers and aggregators are growing by leaps and bounds. In the UAE, about five years ago, online car insurance sales accounted for less that 1% of the total motor insurance. Today, the channel contributes about 5% to 7% of the motor insurance market.
In countries such as the U.S. and India, online platforms have already become a preferred channel for purchasing both life insurance and general insurance products. According to a PWC report, 47% preferred buying insurance through one or another digital mode in India.
The COVID acceleration
The COVID-19 pandemic is an inflection point for the insurance industry in several ways. It has put life and health insurance front and center in the minds of people all over the world. The pandemic has made digitization an almost necessary condition for survival for the insurance industry. With restrictions on travel and the fears associated with even intercity mobility, the online sales channel has become paramount for insurers.
As the UAE marches toward digitization, there are some speed breakers. Despite the adoption of insurtech, there is still the need for some amount of manual paperwork during insurance purchases. For example, medical tests and policy issuance still require offline paperwork. To become truly digital, insurers need to invest more in technology.
Bumps on the road
While internet penetration in UAE is among the highest in the world, the UAE has an insurance penetration of just 1.9%; average global penetration is 6.1%. The insurance industry in the UAE is expected to grow at a compound annual growth rate of 4.2% between 2019 and 2024.
I believe that greater consumer awareness and tailored products could be the game-changers in the long term. In the shorter term, we need to accelerate digitization -- in particular, in the post-transaction phase to allow for instant issuance of the policy.
Quickly building and marketing a strong digital infrastructure is a challenge faced by many distributors. As the industry grapples with this challenge, we also need to re-engineer our operations so they can be run remotely, free from the limitations of confined office space.
See also: 4 Post-COVID-19 Trends for Insurers
What the future holds
Once the changes and innovations become widespread among insurers and distributors, consumers will start benefitting immensely. New, improved and custom-made insurance products to suit the various consumer life stages and financial goals would provide optimum protection against the uncertainties of life. The whole process of buying insurance would shift to digital mode -- from telemedical or video-based medicals examinations to digital fulfillment processes. Premiums will go down thanks to cost-efficient distribution channels.
As the industry moves toward an automated, technology-based marketplace, a plethora of opportunities will arise for progressive insurers and distributors to gain market share. The industry would have more data to assess and analyze individual risk factors, while distributors will have more efficient means to communicate with customers. The insurance industry in general will be able to provide a vastly superior consumer experience.