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UAE insurance industry has room to grow

Dubai - The UAE's insurance is the fastest growing sector in the Gulf region

There is strong potential for insurance companies to grow in the untapped income protection segment as majority of UAE residents have no such plans in place.
According to the report 'Income protection gaps in the UAE' released by Zurich Insurance and Smith School of Enterprise and the Environment, about 75 per cent of expatriates don't have income protection plans in place in case of illness, incapacity or premature death.
The report further disclosed that even among those who have income protection schemes, 72 per cent receive the cover from their employers. The report said that 25 per cent of respondents had insurance to protect their income should they become ill or disabled while nearly 20 per cent had coverage in case of premature death.
An income gap is the reduction in household earning as a consequence of the loss or incapacitation of an adult wage earner upon whom the household relies, taking all public and private income replacement into account.
The Arab expats have lower rate of insurance for income protection compared to other nationalities due to generosity of state benefits in their home countries. Nearly 51 per cent of the western expats have insurance followed by Asian expats at 35 per cent, 14 per cent by the UAE nationals and 13 per cent by Arab expats, it added.
"The gap only widens as savings are used on ongoing treatment, relocation costs, modifying the family home and having to pay the rent or mortgage. Income protection is vital, as your finances remain 'abled', at a time when you are not," says Jason Waldron, SME segment specialist, Zurich International Life.
The UAE's insurance is the fastest growing sector in the Gulf region. The industry is projected to be driven by mainly healthcare insurance, which is mandatory in the UAE, according to an Alpen Capital report released last week.
According to Euromonitor International's figures, the UAE consumer expenditure on insurance is estimated to be Dh572 million during 2017, contributing to 0.04 per cent to the country's GDP, growing by 2 per cent over the past year.
"Growth in expenditure on insurance slowed down during the year as compared to last year when the sector saw a four per cent growth," said Rabia Yasmeen, analyst, Euromonitor International.
"Over the forecast period, the expenditure is expected to grow at an average rate of 2.63 per cent in constant terms to reach Dh641 million in 2022," she said.
25% unable to work in lifetime
Since, there is no state provision for the expatriates in case of disability or death, it makes even more logical and important for expats to opt for schemes that ensure financial stability for the family.
According to the report, the study states that more than a quarter of workforce becomes unable to work at some point during their working lifetime.
Demand for income protection insurance is increasing exponentially as people are living and working longer. Although this is positive, it increases the likelihood that at some point in "our career we may become unable to work" due to a disability.
The Zurich report showed that six out of 10 employees would rather have a good benefit package than just an increase in salary. Therefore, employers have a great opportunity to retain and attract talent through the use of income protection schemes.
The most common reasons that the UAE residents give for not buying insurance are the price, followed by the lack of risk awareness and the fact that the insurance is not available through their employer.
- waheedabbas@khaleejtimes.com