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Dec 2022

Paving the way for InsurTech growth

Source: Middle East Insurance Review | Apr 2022

Technology adoption in Saudi Arabia is still at a nascent stage and there may be a divide between insurers that are well-resourced and those that struggle to keep up with emerging developments. We spoke to Deloitte’s Mr Zeeshan Abbasi to find out what is needed for InsurTech to develop in the kingdom. 
By Nadhir Mokhtar
 
 
Saudi Arabia has been supporting the growth of InsurTech start-ups in the country. This includes drafting regulations and providing sandboxes to test and develop solutions.
 
At the same time, insurers will have to ensure legacy systems are well-managed before engaging their services. Firms with good data management and systems in place were able to adopt digital platforms quickly.
 
Deloitte risk advisory, accounting and reporting director Zeeshan Abbasi said, “They were able to bring in solutions like claims automation and AI pricing. But there are entities that are still grappling with data challenges, current core systems and enterprise resource planning issues. The problem is that they are not able to focus on other aspects because they are already bogged down with these challenges.”
 
He said insurers in Saudi Arabia are taking a wait-and-see approach towards InsurTech developments. “AI-based pricing has fared well in the western markets but when it comes to the local market, the challenge is looking at the return on investment.”
 
These companies depend on other industry leaders in the Middle East to explore and test ideas. He said that while insurers in the region had tried to adopt AI-based pricing, return on investment was low.
 
“That actually gave the indication to other players in the market that this sort of product may not be worth exploring,” he said. Insurers that do not have adequate resources to explore some of these technologies may be averse to taking such financial risks.
 
Local data infrastructure
For InsurTech to grow, local cloud infrastructure is needed to help insurers comply with data residency laws within the country. That could be a challenge as many cloud technology providers are based elsewhere. “We cannot really send data outside of the country. We would need more focus on the cloud-based technologies within Saudi Arabia so that platforms are available locally,” said Mr Abbasi.
 
InsurTech firms entering the market must also deal with documents that are unstructured and recorded in different languages. “They will need to make their tools more specific to the local market. So that they can understand the local documentation and understand the local data nuances,” he said.
 
“We are supporting a lot of the insurance companies with InsurTech initiatives. And what we have had to do is realign our global tools and technologies to specific requirements. For example, medical claim and motor claim documentation. Most of it is in Arabic only. You will have to rely on tools so that you are able to cope with the local languages,” Mr Abbasi said.
 
InsurTech poised for growth
However, Mr Abbasi believes InsurTech activity in Saudi Arabia is gaining momentum. “We are seeing a lot of traction in the market. And a lot of these InsurTech firms are testing ideas and they’re in the process of gaining all the approvals with the regulators.” he said.
 
He added that many conventional insurers have also realigned their strategies and set up a digital presence. “This is the future, and this is very critical from a longer term, financial benefits perspective. Over the next few years, you will see a lot of InsurTech organisations launch within the insurance space,” he said.
 
The Saudi Central Bank’s (SAMA) draft regulations for InsurTech hopes to address concerns about customer data protection and decide on what type of firms could come into the market. Beyond regulations, SAMA is providing tech firms the support needed to launch in the markets.
 
“SAMA is working very closely with some of these tech start-ups to assess, test and evaluate them from the financial as well as technical perspective to speed up their launch in the market. And this is a recent phenomenon that we are seeing and a very positive development. This will help speed up the entire process of moving from the conventional to the digital,” he said. M 
 

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