New projects in the UAE, particularly those announced in Abu Dhabi, will lead to growth of 15-20% in premiums written this year. Total premiums will reach approximately AED60bn ($16.3bn), according to the Higher Technical Committee of the Emirates Insurance Association (EIA).
Outlining developments that have taken place in the UAE insurance market, Mr Mohammed Mazhar Hamadeh, who heads the Higher Technical Committee (according to information on the association’s website) said the decisions of the Insurance Authority related to motor insurance policies have curbed unprofessional pricing practices and protected insurance companies, reported Al Ittihad.
The factors driving insurance growth are also reflected in a report released by S&P Global Ratings which said it believes the main drivers of premium growth in 2019 in the UAE market to be an increase in infrastructure spending in Abu Dhabi following the adoption of a AED50bn multi-year stimulus package and investments in Dubai in the run-up to Expo 2020.
A new labour insurance system to replace bank guarantees for workers could also lead to higher premium volumes for a small number of companies participating in this scheme of up to AED400m, said the S&P report.
Mr Hamadeh pointed out that the number of insurance entities operating in the UAE market is very large relative to the absorptive capacity of the market. There are more than 60 insurance companies and more than 150 intermediaries in the market.
Motor and health
Mr Hamadeh said the Ministry of Economy has played an effective role in regulating the relationship between insurers and car agencies and has helped resolve several issues, especially overcharging by some agencies for spare parts and repairs.
An agreement has been reached with the EIA for gradual reductions in the prices of repair work on insured vehicles by approved agencies for the next five years. At a recent meeting called by the Department of Consumer Protection of the Ministry of Economy, representatives of car repair agencies pledged to submit a schedule of discounts to all insurers in the UAE by 1 April.
Mr Hamadeh also said that the premium rates in some health policies are lower than the sound technical levels that would allow insurers to make satisfactory profits. He thus pointed to the need to raise prices and tighten controls so as to reduce waste and abuse in health insurance.
Premiums written in 2018
In 2018, total premiums written are estimated to have exceeded AED50bn last year, the first time the industry has broken this mark.
S&P said that in 2018, the year-on-year GWP growth rate in the UAE slowed to less than 1% from about 12% in 2017, when minimum motor insurance rates and mandatory medical cover for lower income residents in Dubai led to strong growth of premium volumes and profitability. The decline resulted mainly from weaker consumer spending after the introduction of VAT, cost-cutting of corporate entities, no new mandatory insurance covers, and reduced rates for some medical and motor business. M
AED1 = $0.27