The Gulf insurance industry is severely underdeveloped. The region’s spend on insurance at just 2.6 per cent of gross domestic product (GDP) is far lower than the worldwide average of 7.5 per cent. Key reasons for the lack of insurance take-up are the low crime rates and an immature mortgage sector in the GCC.
With short-term expatriates accounting for the majority of the population in states such as the UAE and Qatar, there is limited demand for household insurance and life assurance. The most developed segment of the insurance industry in the Gulf is that of motor insurance, which is compulsory.
The low rate of insurance penetration represents both an opportunity and a challenge for insurers, whether Islamic or conventional. Based on the world average, there is huge potential to grow the sector.
At present, the fastest growing segment is medical insurance. New regulation introduced in the region has made health insurance mandatory for most expatriates. Compulsory coverage has also been extended to nationals in some areas, and this is expected to increase in the years ahead. But insurers cannot rely on governments legislating to develop other sectors.
Instead they will need to educate consumers and run sophisticated marketing campaigns. The socio-economic trends point to a positive outlook for the sector, but it will not happen overnight and the expatriate element will continue to skew the market.
Furthermore, competition to win business is intense; already most of the major international insurers have a presence in the region, and sharia-compliant companies are proliferating. For the latter, offering Islamic insurance products in the West could prove more lucrative in the short-term, while the former will need to show great patience. For all the potential the GCC insurance market offers, it is for the time-being just that – potential.