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With more and more insurers looking to tackle the life sector – breaking away from the price wars that are eroding margins in so many other sectors - Steven Greenfield, head of marketing, ,Middle east, Zurich international life gives his view on the current state of the market.

August 20, 2012 11:00 by

Lack of insurance penetration in the GCC: the opportunity

Most of the insurers who operate in the Middle East Life market under­stand the relative lack of penetra­tion in the GCC, compared to more mature insurance markets such as Europe or North America.

According to Swiss Re’s latest Sigma World Insurance report (No. 2, 2011), each GCC state spends less than two per cent of per capita GDP on insur­ance premiums in total, and of this spend an average of approximately 90 per cent of these premiums are attributed to non-life products. As an example, in the most successful regional insurance market – the UAE – total insurance premiums per capita in US$ are approximately $1,250, and within this, life premiums on average amount to only $200 per head of population.

The other GCC states spend, on average, between $200 and $600 per annum, per capita, in total on insurance premiums, with a similar 90/10 percentage split between life and non-life.

To give some context, when compared to the combined G7 coun­tries, we see average total premiums at almost $4,000 per capita, of which approximately $2,400 is attributed to Life premiums. Put another way, the most successful Life market in the GCC is the UAE, where average expenditure would need to increase by 12 times to match that of the combined G7 countries.

In summary, not only do we have low insurance penetration in the region, but the insurance coverage that does exist currently is heavily weighted toward non-life needs.

However, this somewhat daunting statistic does not paint the full picture for life insurers and client facing advisers in the region.

According to a recent Alpen Capital report, entitled “GCC Insur­ance sector” we, as an industry in the GCC, have a distinct and untapped opportunity to encourage the use of structured savings and investment vehicles.

The report found that, compared to other regions of the world, residents of the GCC have a high propensity to save, with an average rate of 37 per cent; this means for every $100 dollars earned, individuals in the GCC save an average $37. And this is against a global average of only 22 per cent, and a rate of just 10 per cent in North America.

The most interesting contrast is the percentage of these savings that are directed toward insurance premiums. In the GCC, this is only four per cent of the US$37 saved. The table below puts this into context:

This shows that although residents of the GCC have a similar savings culture to residents of South East Asia (37 per cent versus 32 per cent savings rate), their approach to the usage of insurance products (four per cent versus 57 per cent) is very different. 

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