Jordan life insurers face a market with low disposable incomes and rising unemployment rates, both of which affect the appeal of their products. We spoke to a few experts to get their thoughts about the challenges facing the industry.
According to the Jordan Insurance Federation, the sector experienced growth of 18% in 2021 in gross life assurance written premiums amounting to JOD109.3m ($154.16m) up from JOD92.68m in 2020. Gross life assurance claims paid also grew by 22.3% to JOD64.6m up from JOD52.8m in 2020.
Despite the growth in premiums, some insurers are concerned about the sustainability of stiff competition in the country.
“A merger of insurance companies is needed as the intensity of competition has become a barrier to profits. The number of insurance companies operating in Jordan is large compared to the size of the market. Companies also need to increase the awareness of life insurance among Jordanian citizens,” said Jordan French Insurance Co (JOFICO) senior life and PA underwriter Nael Hamam.
Payment issues amid higher premiums
Mr Hamam said the company performed better in 2021 than the previous two years but has still not fully recovered from the COVID–19 outbreak. “Some of our clients were not able to pay due premiums and that forced them to cancel life policies with our company and even close their own business,” he said.
He said many clients in Jordan still reject the idea of life insurance due to religious reasons. Other challenges the company faces includes a lack of awareness of life insurance. He said clients still consider insurance, especially life insurance, a luxury and not essential. This comes during a period when people are still suffering financially from the pandemic.
“Clients were concerned if they were able to commit to paying life insurance premiums, especially for group insurance and small business owners. Life insurance premiums were increased globally in the past few years due to the losses the insurance and reinsurance companies suffered from the increase of COVID-19-related deaths,” he said.
He said JOFICO’s life business faced the biggest losses in group life insurance and individual life insurance, which includes saving plans and investment plans. It also increased the premiums in general and included pandemics to exclusions in policies to manage the increased losses incurred in the past few years due to COVID-19. Nevertheless, he said the company is prepared for the years ahead as the world recovers from the pandemic.
Unexpected losses from the pandemic
Fenchurch Faris head of life, PA and medical Ghadeer Bosheh brought up how the market saw unexpected losses due to the acceleration of the pandemic in 2021.
“Preliminary figures by the Central Bank of Jordan (CBJ) show that claims increased by 22% in 2021 while overall life insurance premiums have increased by 18%. The latter was mainly due to the rise of investment-linked sales by 65%. Therefore, it is implicitly understood that insurance companies with a concentrated portfolio of group credit life type of policies were the largest hit by far,” she said.
She also said death claims increased due to COVID-19. The economic impact of the pandemic had contributed to health deterioration for some insureds. Other disruptions include premium losses, deficit in actuarial reserves, underestimated pricing tools, premium delinquency and shortages in cash flow.
“Maintaining renewals was one of the main concerns. There was higher competition and that jeopardised clients’ loyalty. There was a need to adjust mortality rates while reinsurers were losing interest in the Jordanian market. Insurers had to go through commercial and tough decisions, preserve their solvency margins and adhere to insureds’ demands and concerns,” she said.
She said life assurance products’ overall loss ratio jumped to over 80% from 65% in two years in comparison to limited premium growth of 10% which is insufficient to compensate for overall losses incurred. Premium adjustments along with strict underwriting measures were also implemented to mitigate the losses.
However, she said the losses can hopefully be recovered by the local insurance market due to low risk retention levels and the fact that life insurance does not contribute to more than 20% of the whole sector.
Regulatory support needed
Ms Bosheh said the government must coordinate with the CBJ and take a role in increasing awareness of life insurance cover. This includes not applying taxes on individual life insurance purchases and advising corporates to obtain employee benefits insurance cover for their staff, which is considered as an employer responsibility for a family protection plan. She said the government should also enforce life insurance cover for bank borrowers, regardless of loan type, with strict underwriting measures.
“It will be a recovery year for the market. However, companies will most probably go back to insurance basics by developing individual life insurance products and investing in sales and marketing which can sustain the life insurance market,” she said.
Customising products to meet consumer needs
Metlife Jordan country manager Osama Hannoush said that low levels of disposable income and rising unemployment rates are affecting the purchasing power of customers. However, this reduction in purchasing power has also created an opportunity to enhance product offerings and customer-focused solutions, he said.
He said the company’s insurance specialists, direct-to-consumer sales force and brokers allow it to differentiate itself in the Jordan market. He said there is a lack of awareness of insurance and mitigation of risk particularly in life insurance. In addition to the lack of affordability, a sizeable proportion of the population cannot afford insurance. Of those that can, many rely on family or state resources for life cover and old-age care. M