Although the recent performance of insurance companies in Saudi Arabia has been rather tame, the sector presents long-term investment opportunities, says a report released by the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IsDB) Group.
Titled “Islamic Finance in Saudi Arabia: Leading the Way to Vision 2030”, the report represents the first comprehensive analysis of the Islamic finance sector in the kingdom. It was published in conjunction with the G20 Summit held virtually in Saudi Arabia on 21-22 November 2020.
The report states that there is a shortage of retakaful capacity, which might explain why the takaful sector has not grown to the level initially hoped for. Life insurance penetration, at present, also lags far behind general and health insurance.
Despite the regulator’s efforts to issue new products such as in life or savings insurance, compared with markets worldwide, G20 peers (such as Turkey and Indonesia), Malaysia as well as the GCC, insurance penetration and density in Saudi Arabia is relatively low.
However, if insurance companies can develop innovative and Shariah-compliant family takaful products, it is reasonable to assume that life takaful could grow even more substantially, says the report.
Growing life expectancy, tax incentives on insurance products, favourable savings associated with insurance are also further encouraging the customers across insurance segments.
Economic growth, rising government spending, technological innovations and increased consumer awareness about insurance products are key market drivers in Saudi Arabia.
The government’s policy of insuring the uninsured has progressively pushed the insurance penetration in Saudi Arabia and the proliferation of insurance schemes. Health insurance is a rapidly growing sector driven by the trend towards obligatory medical insurance.
Strong demand for insurance of vehicles, property, health and other insurances across Saudi Arabia is also driving the revenues of insurance companies in the country.
The increasing number of digital distribution channels is helping insurers market insurance policies. InsurTech, messaging platforms, and online sales channels are contributing to the insurance landscape in the country. Through different distribution channels, insurance companies in Saudi Arabia are providing a wide variety of products with varying levels of complexity that are designed for different groups of businesses, individuals and other organisations. This will provide ways to meet the emerging demands of every end-use customer and propel net sales, the report says.