SUBMITTED BY: Israa Zaidi
COURSE: B.A L.L. B (H)
CONTENTS
| S.no | Topic | Pg.no |
| 1. | Abstract | 7 |
| 2. | Methodology | 8 |
| 3. | Literature review: | 8 |
| 4. | Structure of insurance companies in the UAE | 9 |
| 5. | Analyzing growing market trends | 16 |
| 6. | Challenges and Technology | 21 |
ABSTRACT – This research paper will examine the reasons for filing for insurance in the UAE, as well as how crucial and vital it has grown in recent years. It intends to concentrate on the insurance industry, with a particular emphasis on car insurance claims, health insurance and protection of estate. This study explores the key drivers of the industry’s growth, including legislative reforms, economic development, and changing demographics, using a wide range of data sources and industry publications. The challenges that the industry may face would be how ex-pats may gain or be harmed by these insurance policies and schemes as well as the future of these businesses. It will shed light on the issues that the UAE insurance business faces, such as regulatory compliance, increased competitiveness, and the need to constantly digitize and innovate. It will also briefly cover the impact of global events, such as COVID-19, on the insurance industry in addition to explaining the obstacles, this paper seeks to investigate the emerging prospects, such as how the insurance industry will attempt to fit into or build a brand-new image in the digital age, the role of technology, and how it will make it easier and more convenient for customers and businesses. It also intends to examine future expansion in diverse areas such as motor vehicle health, and estate. It will also examine and make a small comparison to other Gulf countries, as well as what challenges it may face in the near future and compare Takaful to other insurance schemes. Using the research done in this paper, businessmen and foreign investors who are trying to grasp and navigate the UAE insurance industry will be able to obtain valuable insights that will assist them in their efforts.
Keywords: Insurance, Covid 19, Challenges, Technology
By Israa Zaidi
METHDOLOGY
This paper’s study design would be exploratory, with laws, policies, and general statistics of people obtaining insurance and the reasons for getting insurance would be studied and examined, along with a full analysis of what the trends and challenges of the UAE insurance industry are. The literature review collects data from previously published papers and articles. The study is also quantitative, in which figures and graphs from publications and reports are studied and suitable explanation is provided as to why the amount or percentage is large or low. It also examines statistical data, industry trends, and insurance company financial reports to gain insights into market growth, performance, and trends. It does a comparative analysis, comparing the UAE to other GCC countries such as Saudi Arabia and Kuwait. The information in this research article has been referenced and cited with the permission of the authors or organizations. All the data in this study report would be accurate, up to date, and have trustworthy information.
LITERATURE REVIEW
Accidents, death and injuries are inevitable, and they can come in very uncertain ways. 2020 taught us that nothing is more precious than our health and wellbeing. Countless people have lost their lives due the very strange pandemic that took place and even though things may seem out of our hands, we can still have something to grab unto and we must have always had a plan for the unforeseen that might come next.
The country of United Arab Emirates is introducing compulsory health insurance. The policy started around 2014 in Dubai and Abu Dhabi, and it has been expected that many people living in the U.A.E will have a health insurance by 2016, but U.A.E has been brewing this idea of getting a health insurance way back in 2006 where it decided to issue mandatory insurance to ex-patriates. Later, all company’s employers were responsible for providing insurance to their employees, and this incentive was even viewed as effective and worthwhile, and the government has since enforced precise licensing and ensures high quality of services offered by insurers.
Since the insurance authority has been incorporated into the Central Bank of UAE, or CBUAE, by Decretal Federal Law No. 25 of 2020, the United Arab Emirates Central Bank has been in charge of monitoring and controlling the insurance sector.
His Highness has emphasized that the banking sector is always a crucial pillar of the UAE economy. Sheikh Mansour bin Zayed Al Nahyan, the Chairman of the Central Bank and Deputy Prime Minister of the United Arab Emirates, has stated that the wise leader is determined to make decisions that can improve the performance and objectives of federal entities by uniting their efforts do that they can accomplish the desired results with a forward-looking vision.
The Honourable Governor of the CBUAE Abdulhamid M. Saeed Al Alahmadi had stated that the central bank would guarantee high standards of supervision and regulation that would be applied in all the sectors and through this they can govern the workings of payment service providers, banks, insurance, and money exchangers.
Their goal was to establish a successful insurance industry that safeguards policyholder interests, ensures adequate monitoring and regulation, and is distinguished by financially stable, skilfully managed insurance market participants who uphold the highest norms of market conduct. A developing and diverse economy would be well-served by this kind of insurance industry.
STRUCTURE OF INSURANCE COMPANIES IN THE U.A.E
INSURANCE COMPANIES IN U.A.E
There are tafakul insurance firms as opposed to national and international insurance companies. Takaful, sometimes known as “Islamic insurance,” is a way for companies to lower the financial risk associated with unanticipated disasters. Takaful is viewed as a social contract that fosters cooperation and solidarity amongst a group of people who consent to sharing the loss or harm from a fund that they all contribute to.
In contrast to traditional insurance, which distributes risk from the policyholder to the insurer, takaful insurance allows participants to bear the risk jointly. Every participant makes a payment into a Takaful fund. Subject to the Takaful terms and conditions, the participant shall receive the claim amount in the event of a loss. One can connect with a group of risk-averse individuals who share the same values by using takaful. The system’s foundation is built on the idea of shared responsibility and engagement, that aims to help one another cope with the weight of sorrow.
Takaful insurance (Islamic insurance) is an essential aspect of the insurance sector, and its growth is critical to the UAE’s strategic goal of being the global hub for Islamic finance. The UAE is a forerunner in this field, having hosted Takaful insurance since 1979.In 2010, the UAE was the first country in the MENA area to issue a Takaful insurance regulation. The UAE has 62 insurance firms, including 12 Takaful insurance businesses, as of 2021.Due to mergers aimed at developing a larger Takaful insurance business and improving their efficiency, fewer such companies would be doing Takaful business in 2022. There are no restrictions for foreign National Companies, however they must apply for permission to practice through a branch or an insurance agent.
To receive a license, the paid-up capital of the company should be more than 100 million or the equivalent. The company should place a bank deposit of 6 million in case of practicing for getting an insurance for property and liability and 4 million the in case of practicing personal funds insurance and funds building operations.
Types of Insurance one can get in the U.A.E:
- Health Insurance
- Car Insurance
- Property Insurance
- Liability Insurance (personal accident insurance, employer liability insurance)
Health Insurance- As insurance in the U.A.E has been introduced alongside the banking sector and new legislative reforms have been formed in the industry and now policy makers have come up with a policies that covers all the people living in the U.A.E, these policies has been proven to be efficient by the number of activities that took place in the year 2011 for an insurance plan. It has been estimated that 67.2 million insurance plan activities took place in the year of 2011 in U.A.E. 47% were accounted for consultations. 21% were for drug descriptions, 19% were DRG’S AND 5% were, 5% were dental services and 3% were materials.
Thus, GP visits, specialist referrals, tests, surgical procedures, maternity, and emergencies will all be covered, per the policy. It is important to note that people falling between the ages of 25-54 account for almost 64.15% of the population and people falling between the ages of 15-24 account for almost 12.36% of the population including both Emiratis and expatriates.These findings imply that examinations and crises ought to be the primary emphasis of health insurance.
It is also important to note that circulatory system issues are the highest cause of death in the UAE.
From gathering statistics, it must be noted the leading cause of death for both men and women is ischemic heart disease, with a percentage of 52.3% and 20.9%, respectively.Ensuring that people get checked out is very much crucial to lowering the death rate since early detection of diseases allows medical experts to treat them.
The insurance healthcare program began with employers offering insurance to employed persons (including expats and Emiratis). Larger enterprises with more than 1000 employees were required to provide mandated health insurance to all employees by 2014. Organizations with 100-999 employees were to provide mandatory health insurance by 2015, while enterprises with less than 100 employees would have health insurance by 2016.
These steps would make the policy less expensive for businesses. It is reasonable to believe that the policy would be beneficial since it allows people to access high-quality healthcare at a reasonable cost. Clearly, quantitative data analysis provides vital insights into policy success. Without looking at numbers, it would be possible to examine the policy and find its shortcomings (if any). As a result of the research of key demographic data, it is apparent that healthcare insurance must be needed for Emirati society.
In the emirate of Dubai and Abu Dhabi having a health insurance is considered mandatory. Dubai’s mandated health insurance law assures that every resident and national has access to healthcare services. The health insurance law in Dubai compels employers to provide a certain level of healthcare coverage to their employees without withholding or reducing their salary to afford the costs. The compulsory medical insurance for Individuals, employers, sponsors, or healthcare professionals who disregard the law may face penalties under Dubai law. In addition, an employer or sponsor in Dubai may face a monthly penalty of AED 500 to AED 150,000 if they fail to offer the minimum health insurance coverage required by the Dubai Health Authority (DHA) to their employees or those under their sponsorship.
As of 2017, experts have stated that 4.6 million people in the U.A.E have health insurance and very few are uninsured. As of recently it has been stated that the UAE healthcare insurance market is at a rapid growth and is expected to grow from 10.3 billion dollars in 2022 to 19.6 billion dollars in 2030. It must be noted that those that are exempt from receiving insurance are investors, business owners or those who manage and own their businesses themselves, domestic workers and employees hired on a temporary basis.
Car Insurance – Driving is not an easy task, we must always be careful on the road but driving on the road can be risky and accidents can happen at the most unexpected times, no matter how safe we are. The risks w9hile being on the road – is not just on you, but to the passengers, your vehicle and other people on the road. Therefore, every driver must carry a car insurance with them, so that they can pay for the damages or injuries caused to others and themselves if they are found to be liable. The damages caused for repair and recovery of the car can be quite hefty, therefore in order to protect ourselves from these highly exorbitant bills. Insurance is highly required.
In the UAE, every car on the road must have third party insurance and failing to comply with this law can result in a hefty fine. The penalty for driving without an insurance can range from a fine of 500 AED and 4 black points and a seven-day retention period. Insurance providers in the UAE cover car policies and not the driver. Therefore, insurance companies will grant insurance to anyone in the UAE who has a driver’s license.
The UAE has the 2nd largest insurance market behind Saudi Arabia. As of 2021 there are currently 62 insurance companies.
Furthermore, the UAE insurance industry increased its gross written contributions by 0.5% in 2021, but penetration remains low in comparison to several OECD countries. Furthermore, many types of insurance remain optional. The largest industries in the UAE are health insurance and automobile insurance. Many of the local providers are cooperatives that provide takaful, or sharia-compliant insurance.
The types of car insurance available in the UAE are:
- The most fundamental and affordable kind of insurance is Third Party Liability (TPL) insurance. If the loss of a life, a physical injury, or property damage is caused by a third party and involves your vehicle, you will be compensated for any damages that may be attributed to them. However, TPL will not pay for any damages that you did to your own vehicle. Your only choice will be TPL if your car is seven years old or older.
- Comprehensive Insurance covers TPL in addition to the price of replacing or repairing your own vehicle, whether or not it was your fault. Furthermore, covered are mistaken collisions, over turnings, fires, explosions outside the vehicle, self-ignitions, burglaries, thefts, and violent activities by strangers. For cars up to one or two years old, agency repair is covered, depending on the insurance. Comprehensive coverage is offered for cars up to seven years old, depending on the vehicle and the insurance provider.
- Excess (Deductible): would apply to a full coverage insurance. It is the sum that, if your accident claim is not recoverable, the insurance will deduct from the compensation that is paid to you. The insurance policy will outline the smallest excess, which may differ for different vehicles and insurers.
- : Apart from the standard cover, you have a range of other options to choose from, including:
– Individual accident protection for the driver and any passengers-
Roadside assistance or recovery from breakdowns-
Car Rental or Supplementary Insurance
– Extensive geographical coverage (e.g., Qatar and Kuwait)
– Protection off-road, among many other things
Property Insurance- Home insurance, commonly known as homeowner’s insurance, is a type of insurance that protects your home and its belongings against damage or loss. Due to the surge in property prices and the hazards involved with living in an urban environment, home insurance is becoming increasingly significant in the UAE.
In the UAE, home insurance policies might differ based on the insurer and the level of coverage necessary. In general, homeowners’ insurance policies cover the following:
- Property damage: This insurance covers damage to your property caused by natural catastrophes such as floods, earthquakes, storms, or fires. It can also cover damage caused by intentional acts such as burglary, theft, or vandalism.
- Liability insurance protects you if someone is injured on your property or if you damage someone else’s property. If you are sued for damages, it may also cover your legal bills.
- Alternative housing: If your home is rendered uninhabitable due to damage caused by an insured occurrence, home insurance may pay the cost of alternative housing until your home is repaired or rebuilt.
Unlike health and car insurance, property insurance is not mandatory, but it is still seen as one that is highly recommended so that properties could be protected from unforeseen damages or losses.
Over the years, the UAE has earned a reputation for being a generally safe place, it is generally resistant to floods, earthquakes, fire, and theft. These types of instances however do take place on certain occasions, and they could very likely happen again in the future. On one specific instance in the year 2017 the very infamous Address Hotel Downtown abruptly caught fire and the 86- story high torch tower at the Dubai marine was damaged.
According to a 2018 Yallacompare survey, nearly 70% of UAE residents do not have home contents insurance, with many preferring to “take a chance” rather than insure their property. “When compared to the overall insurance market in the UAE, the home insurance market is relatively small,” explains Jonathan Rawling, chief financial officer of Yallacompare. The same survey that was conducted also said that 35% of people did not find a reason to get a home insurance at all. Another reason is that under home policies – tenants would benefit from alternative accommodation cover – where they would receive a certain amount of payment if the current place that they live in becomes unhabitable.
ANALYSIS THE GROWING MARKET TRENDS
Looking at the scope of the three most asked for insurances in the UAE. We see that the highest demand and obligation by the UAE government states that health and car insurance is the insurance that most people seek after. Property insurance is not really that requested or asked for by many people. The rise of health insurance in the country of UAE is not that surprising, after the covid 19 pandemic people are realising the risks involved when we lose a loved one so suddenly.
The Covid 19 pandemic has had a significant impact in the economy, it affected the ability of an individual to travel, trade and have proper working arrangements and consumption of materials have also been impacted by the pandemic.
On 11th March 2020 WHO (World health organisation) declared the coronavirus outbreak as a pandemic that spread across the globe. The coronavirus significantly affected the GCC region not limited to but including the United Arab Emirates. As businesses in the UAE till today are stills struggling to grow or retain its position, the insurance industry manged to see a growth in the year of 2020, showing how resilient and outlasting the UAE insurance industry can be.
In response to the covid 19 many people went for vaccinations for the virus and there was an increase in public health offerings for wellness for employees who were returning to the working environment. All these services combine will increase the health care costs and will form the backbone for health insurance pricing. Other changes that the insurance industry will face is the disruption of sale targets, increase in claims and charges in underwriting policies and procedures.
Even before the Covid 19 Pandemic made individuals more aware of the need to obtain insurance, the UAE insurance market was continuously growing. For nearly ten years, the United Arab Emirates remained the second-largest insurance market in the Gulf, and in terms of gross written premium, it ranked 37th in the world in 2017–2018. The UAE is home to a sizable expat population, a robust economy, and strong demographics. Perhaps most significantly, in contrast to most other regions, the UAE mandated health and car insurance, and combining all these factors, along with the reorganization of the legal structure that UAE has introduced, were the primary drivers to the growth of the insurance market. According to reports, Expo 2020 will help the insurance sector even more.
Due to its vital role in supporting the national economy, the insurance industry is one of the most active in the United Arab Emirates, as seen by the 3% growth rate in its GDP contribution in 2018. In the United Arab Emirates, 2.9% of people overall had insurance in 2018. At USD 1,194.7 billion, the nation has the highest insurance concentration among GCC nations. One of the main causes of this development was the establishment of uniformly high vehicle insurance prices.
The average percentage of GCC markets with penetration of insurance is 2.9% in the UAE, 1.9% in Bahrain, 1.6% in Qatar, 1.4% in Oman, and 1.2% in Saudi Arabia. With a 0.9% average insurance penetration in 2018, Kuwait had the lowest rate. The main causes of low penetration include an inexperienced life insurance market and a lack of awareness regarding the need for insurance products. Moreover, financial aid provided to local residents makes insurance ineffective for that segment of the population. Among the GCC countries, the United Arab Emirates has the highest rate of insurance penetration because of its diversified population, which is mainly made up of expatriates, and because it has put in place the necessary health and car insurance systems.
Source: Mordor Intelligence
Among the most advanced in the GCC, the UAE’s regulatory framework is becoming stronger with the adoption of worldwide standards. It is mandatory to get automobile coverage in the United Arab Emirates.
It is anticipated that non-life business lines, such property and fire insurance, would grow in importance as risk coverage grows in popularity and the government, through Vision 2021, emphasizes infrastructure development more.
In 2023 – the U.A.E Health and Medical Insurance Market size is estimated to be at 9.35 billion Dollars and the expectation is that by 2028, it would reach 16.76 billion dollars.
The UAE’s regional authorities have made significant improvements to regulatory monitoring in recent years to increase flexibility and discipline while simultaneously encouraging consolidation. Long-term, such reforms are anticipated to improve insurers’ credit profiles and asset quality, while also making the insurance market more transparent, competitive, efficient, and sustainable. Insurance companies in the UAE may face further margin pressure because of rising VAT rates in the region and the costs associated with being compliance with new laws.
There are now more national insurance businesses than there are foreign national ones. Compared to foreign national enterprises, the national companies’ gross written premium is increasing at a faster pace. . The UAE has a diverse spectrum of government-funded and fast developing private healthcare industries that provide healthcare to the population. The share of health insurance provided by national firms is expanding because of the mandated health insurance plan. Even government programs like Saada, Thika, and others are propelling national insurance.
When it comes to takaful companies – they saw an increase of 20.3% in their insurance revenue in 2023 in comparison to the 16.3% increase if their traditional players.
Ten of the 26 businesses had better net earnings than in HY1 2022. As they did in HY1 2022, Orient Insurance Company, Abu Dhabi National Insurance Company (ADNIC), and Sukoon Insurance Company led the UAE’s insurance industry in terms of overall profitability in the first half of 2023.
Personal accident, group, and individual health insurance are the three categories of health insurance. Group health insurance is by far the most popular type of health insurance that businesses choose, and it appears to be dominating the market. In the present year, it has contributed almost 95% of the economy because it serves associations and organizations that jointly provide insurance for all their employees, it is by far the most appreciated. Additionally, it results in a variety of plans with features including premium structures, deductions, and benefits that give people more options to suit their requirements and are generally less expensive than individual health insurance.
CHALLENGES AND TECHNOLOGY
The UAE and all over the GCC. Medical insurance in the market has grown oversupplied with too many insurers throughout the past ten years. There are more than 35 insurers on the market, and they all have various goals, both short- and long-term. Due to the current business constraints and the fragmented landscape, the market is finally reaching a point when market consolidation is unavoidable.
A plethora of mergers and acquisitions are now taking place in the insurance sector in the region. It is only to be expected that smaller firms, lacking the global experience and flexibility to respond quickly to changes in the market and regulations, will be forced out of the market as regulations mature and tighten. To maintain the long-term viability and affordability of the health insurance system, major regional and international insurers will have increasing market influence.
Other developed markets have experienced this problem. For example, the four largest medical insurers in the UK own a combined 94% of the market. These significant players are in a good position to develop the private healthcare industry, guaranteeing its long-term viability and affordability.
This is a good illustration of an overlooked market, where insurers may truly make a difference and contribute to the affordability, sustainability, and high standard of treatment provided by the private healthcare system.
As the GCC’s healthcare industry grows, there’s a growing push to encourage private investment by pushing the use of public-private partnership (PPP) models. Numerous factors contribute to a favourable outcome for healthcare spending, one of which is the widespread implementation of mandatory health insurance, which is expected to fortify the industry by enhancing accessibility and consumption. Particularly in Dubai and Abu Dhabi, the privatization of clinics, hospitals, and mandated health insurance is expected to stimulate spending and lead to a more integrated health system between insurers and providers.
However, small and medium-sized businesses (SMEs) also incur higher operating costs because of the law of mandated health insurance. With 42% of all jobs in the country and 95% of all businesses, the SME sector is the main driver of the UAE’s economic growth. 40% of Dubai’s economy and 60% of the UAE’s economy are attributed to SMEs as a sector. In an unstable business environment, small and medium-sized enterprises (SMEs) more attracted and would prefer to choose only the basic local coverage for their staff members and employees and if they need an insurance at a higher level, they can do on their own and they would cut down their own expenses . Nonetheless, one of the main issues facing companies in the post-pandemic era is talent risk.
SMEs should consider various health insurance tiers if they want to draw in and keep talent. This could depend on factors including seniority, duration of employment, and particular requirements. By keeping employees, providing individualized health insurance coverage yields long-term returns on investment.
2020’s events have demonstrated that having health insurance is insufficient to keep individuals safe in an emergency. In addition to local travel, political issues, and security concerns, customers want access to professional guidance and counselling on healthcare needs. People live, work, and travel in connected parts of the world where political and security conditions are subject to sudden changes.
People and businesses are becoming more and more dependent on 24-hour security and travel guidance to enable them to make well-informed decisions, especially when it comes to medical tourism. Furthermore, due to regional variations in healthcare standards, there is an increasing need for customers to have access to unbiased counsel and direction from specialists in a given area in order to make well-informed decisions regarding their treatment plan.
The UAE has seen a steady increase in inbound medical tourism as more people travel there for treatment that ranges from extensive surgery to rehabilitation to cosmetic alterations. Dubai and Abu Dhabi were placed sixth and eighth, respectively, as the top medical tourism destinations worldwide in the most recent Medical Tourism Index Ranking. A thriving hospitality ecosystem comprising a multitude of attractions, hotels, entertainment venues, top-notch aviation services, and efficient transit logistics has solidified the United Arab Emirates’ standing as a top destination for medical tourism.
Technology and digital health have grown rapidly because of the COVID-19 epidemic. The region’s insurance companies are focusing on telehealth as a service to give quicker, less expensive, and easier access to care. Without a doubt, telemedicine has shown to be a crucial instrument in maintaining access to healthcare during the epidemic.
Apart from their convenience, telehealth services are also reasonably priced; obtaining medical advice through a telehealth service does not result in a higher utilization of an insurance coverage. Implementing a telehealth service will probably result in fewer long-term increases in insurance costs.
More digitization is anticipated to disrupt the healthcare industry, just like it does every other industry. It is anticipated that new healthcare models centred on remote monitoring and consultation would surface. The government healthcare services in the United Arab Emirates are already incorporating telehealth.
Technology and simultaneously the adoption of artificial intelligence in the insurance industry necessitate a dramatic change in organizational procedures and culture. The task of managing change becomes extremely difficult when staff members must adjust to new responsibilities, processes, and systems. Adoption may be constrained by reluctance to change, anxiety about losing one’s career, and ignorance about the potential advantages of artificial intelligence. To create a supportive and cooperative atmosphere for using AI technology, insurers need to give top priority to change management techniques that incorporate training, communication, and employee involvement across all levels.