Al Ittihad Newspaper Interview
with His Excellency Eng. Sultan Bin Saeed Al Mansoori,
Minister of Economy and Chairman of the Insurance Authority
First: International Indicators:
United Arab Emirates ranked among ten global leaders in the «Significant Growth in Insurance Premiums» Index, according to a report prepared by Ernst & Young and Oxford Economics. Meanwhile, British Business Monitor International confirmed that the insurance sector in the UAE has become the best regionally by calculating opportunities and risks.
1) Factors of bounces achieved by the insurance sector at the global indicators level and the relationship betwwen this progress and the legislative system that has been developed for the sector.
The UAE insurance sector's occupation of this high global ranking and the first rank between the Arab insurance markets is the result of several factors, including:
1- The balanced and open economic policy followed by the United Arab Emirates at the national, regional or international level.
2- Global competitiveness of the national economy sectors and the indicators of practicing business and investment in the UAE.
3- Regulatory frameworks developed by the Insurance Authority, which would provide the proper insurance environment for the insurance companies and related professions to practice their activities in an atmosphere of confidence in the present and in the future and within the rules of protecting the insurance consumer without exposing the insurance companies to uncalculated risks in advance.
4- Great efforts made by the Insurance Authority to enhance the performance of the insurance sector and promote its competitiveness, as well as the efforts of insurance companies in developing their products and services within an atmosphere of competition, which may be impulsive at times, but they create an atmosphere of multiple offers in front of the insurance consumer.
5- Technical, financial and legal staff working in the UAE insurance market is the best in the Arab insurance markets and it is well known that expertise is the cornerstone in every development.
All these factors led the volume of subscribed insurance premiums to reach about AED 37 billion last year, and the UAE market is expected to achieve the increase achieved annually of 10% in 2016, while the insurance companies investments amounted to about AED 46 billion the previous year and are expected to increase in 2016.
2) What is the Authority's plan for enhancing the sector? and what are the actions taken by the Insurance Authority to minimize the sector's exposure to the new economic variables, particularly those related to lower oil prices?
The development plan for the Insurance Authority includes several basic important axes; "insurance axis", "investments axis", "mechanisms of applying the best international professional standards axis", "smart services development axis" and" the human resources development axis" through rehabiliting staff with professional insurance-relevant certificates, such as ACII .
The "insurance axis" is one of the main axes for developing the performance because legislations are the backbone of the insurance industry. Therefore, the Authority is currently attempting to study several legislative projects, while working to optimize the application of the recently issued legislations such as the financial instructions, insurance brokerage system and the vehicle insurance documents consolidation system.
There are several new measures taken or to be taken by the Insurance Authority within the framework of promoting the UAE's insurance market, including:
- Activate the financial instructions that will lay the financial rules for the insurance companies on bases derived from the international solvency
- Encourage companies to cooperate in multiple fields, especially that no single company is able to provide the required insurance services such as the insurance gathering in the nuclear energy and aviation insurance covering, as some positive steps have been taken in this field.
- Considering the solid financial status, advanced technical expertise and good international relations enjoyed by some national insurance companies, some companies went out to operate either in the Arab region or in the international markets, and the Insurance Authority sponsors such an approach and introduces whatever facilities possible.
- Organize the reinsurance works: A project of instructions in this regard is currently under study by the Authority. Upon the issuance of these instructions, we believe that the UAE insurance market will be a valid insurance environment for practicing the reinsurance business.
- Insurance Authority also works on the implementation of an important project (founding of the Emirati Insurance Institute) in collaboration with an international institute specializing in this area and we believe that this step will provide an opportunity for Emirati youth who want to specialize in the insurance business at the international level to achieve their goals. This institute will be the first of its kind in the entire region.
3) What is the Authority's strategy to enhance the global competitiveness for the insurance sector in the UAE?
Insurance Authority has achieved outstanding achievements and results during the past few years through the development of laws and regulations governing the insurance market in the UAE in accordance with the best international systems and standards and upgrading the Insurance Authority services provided to policyholders and the insurance business sector.
The analysis and assessment of the insurance business results in the UAE during the past few years confirm that the UAE insurance sector has achieved more positive and quality results compared to the previous years, after most of the insurance indicators have jumped with high and balanced rates.
These data are confirmed by the results of the studies issued by international institutions specialized in studying the markets, which put the UAE at the forefront of the region's markets and within the advanced ranks globally, including the recent report of Ernst & Young and Oxford Economics which ranked UAE among the ten global leaders in the «Significant Growth in Insurance Premiums» Index..
In this context, Insurance Authority issued in 2014 the financial instructions to insurance companies to regulate the financial and technical aspects for this sector, which would establish the financial and technical foundations to organize the work of these companies on the one hand and the prices of insurance products issued by these entities on the other hand in addition to making a qualitative short-term and long-term leap in the local insurance market.
The Authority has also issued the insurance document unification system which includes the unified regulation of the vehicle insurance policy against civil liability and loss, which is also an important and quality shift in developing the organizational foundations and technical regulations for developing the performance of the UAE insurance market and vehicle insurance sector and protecting the policyholders' rights due they contain terms and provisions that match the competitive level of the UAE economy and keep pace with the best prevailing practices in the insurance industry worldwide.
These and other legislations that the Authority is working on their issuance will strengthen the legislative base of the UAE insurance sector and its operating entities on strong legal, technical and financial bases, increaase the competitiveness of the sector at the regional and international levels in accordance with the best prevailing international practices, and thus to increase the contribution of the insurance sector in GDP and support the national economy growth in all fields in accordance with sound and strong foundations.
Second: Growth Prospects
4) What is the volume of the subscribed premiums expected by the end of this year and by 2020?
Insurance Authority's development programs and projects along with the positive growth indicators distinguishing the national economy and the domestic market confirm that the UAE insurance sector is heading towards a new phase of increased business growth and development of the UAE insurance market competitiveness and strengthening its regional leading position and international advanced ranking.
In this regard, the value of the subscribed premiums in the insurance industry are expected to reach about AED 40 billion by the end of this year, and to about AED 60 billion by 2020, reflecting a 10% annual growth rate.
5) What are the most important insurance sectors that enjoy future growth and expansion opportunities in the UAE?
The volume of insurance business in the UAE market is growing continuously, and the opportunities of the insurance industry growth in the UAE are permanently increasing; over the coming years, the UAE insurance market is expected to witness a huge activity in the development of various insurance products to cope with the economic development of the country in various fields.
In this context, the health insurance enjoys significant growth opportunities, especially in the light of the existing plans to complete the compulsory health insurance program in some emirates, which will give a strong impulse to the volume of premiums. We also expect that life insurance and vehicle insurance sectors will continue their growth marsh in the coming years.
6) Is the market in a bad need of mergers between insurance companies? What is the mechanism that will encourage the local insurance companies to mergers to create giant entities capable of competing globally?
Merger is one of the most important strategic choices that national companies should take to improve their performance, enhance their strength and raise the efficiency of the insurance sector.
The Insurance Authority is seeking to create strong entities out from national companies that can compete globally and maintain the leading position of the UAE insurance sector regionally and internationally.
Based on that, the Insurance Authority is working to achieve mergers between the companies to attain major benefits that arise from the formation of insurance units with a huge portfolio and solid financial base able to attract distinct technical, financial and legal staff, by urging companies to merge both in their meetings with insurance companies and relevant professions or through translating this in the issued regulations and instructions, by stimulating companies to achieve this goal, especially those companies that can not meet the legal and regulatory requirements, with emphasis on the Authority's readiness to provide possible facilities for the success of any merger in the local market.
7) Does the Authority intend to increase the minimum requisite capital of the insurance companies?
Insurance companies form an economic power reflected positively on the integrity of the insurance market and an input to the GDP, which requires a permanent focus on the capital solvency and work to supply it and complete its requirements in accordance with the international standards.
Based on the provisions of the Federal Law No. (6) for 2007 on the establishment of the Insurance Authority, the insurance company must be a public joint stock company and the same law entrusted the Council of Ministers to determine the capital of an insurance company. Therefore, raising the minimum requisite capital needs the coordinated efforts of a number of government agencies with respect to offering shares to subscription and taking into account the capacity of national companies to offer additional capital, with the Authority's confirmation and encouragement of insurance companies to merge which contributes to the support of the national companies as powerful entities that can compete globally.
Third: New legislations:
8) The unified regulation of the vehicle insurance policy system, issued by the Insurance Authority's Board of Directors No. (25) for 2016, formed a quantum leap for the sector, how do you assess the companies' reaction and willingness to apply?
The unified regulation of the vehicle insurance policy system included terms and conditions that match with the UAE economic advanced level and keep pace with the best prevailing global practices in the insurance industry worldwide.
The issuance of this system came after numerous consultations with government agencies, companies, specialists and with the Emirates Insurance Association in addition to the positive reaction with a lot of observations and suggestions received from the policyholders and the public, which will be reflected positively on the response of the companies and the market for the system application.
9) What are the most important legislative paths, laws and regulations to be issued in the next phase?
Insurance Authority's strategy aims to build an insurance business sector that enjoys a high level of professionality, craftsmanship, competitiveness in addition to the development of the UAE insurance market position as a role model regionally and globally, through enhancing benefits achieved in this market, which is the largest in terms of insurance premiums and the best in terms of rgional performance, as we mentioned, so as to serve the national economy, protect policyholders, achieve the interests of businesses, achieve sustainable growth for the UAE insurance sector and increase its contribution to the overall national economy.
The Authority attempts to develop laws and secure local market needs and requirements of the new legislation and laws that promote the growth of this vital sector of the national economy.
In this context, the Authority is currently working on amending the Federal Law No. (6) for 2007 on the establishment of the Insurance Authority and the organization of its works, which include measures aimed at accelerating the pace of processing pending files in courts and insurance companies, accelerate the compensation process, as well as strengthen the role of conflict resolution through reconciliation as an alternative method for litigation in courts. The draft amendment also includes a set of measures and incentives to encourage insurance on persons and life insurance categories which play a key role in the formation of long-term savings and therefore investment.
The Authority is also working to issue rules regulating insurance companies dealings with banks to market insurance policies, Actuaries System project, as well as insurance producers instructions project.
10) How does the Authority ensure the application of the compensatory provisions in the two policies upon taking decisions in the lawsuits?
The two new vehicle insurance policies have been issued under a regulation made by the powers of the Insurance Authority's Board of Directors, and therefore the provisions included in the regulation and the two documents are applicable, otherwise the company may violate the provisions of the Federal Law No. 6 of 2007 concerning the establishment of the Insurance Authority and the organization of its work.
On the other side, the Authority stresses that companies should abide by the regulations, instructions and decisions issued by the Authority as a regulator and observer of the insurance sector in the UAE.
However, we would like to emphasize that the federal law required from each company registered with the Authority to make a deposit as security for the performance of their obligations.
11) How would the Authority face some companies' over-pricing practices under the pretext of increasing obligations stemming from the issuance of the new policy?
In this regard, we would like to confirm that the unified regulation of the vehicle insurance policy system included provisions requiring the companies to abide by the Authority decisions regarding the pricing and tariff. Accordingly, the Authority in this context has worked on conducting actuarial studies to reach the fair price through commissioning their actuaries to prepare tariff rates complying with the losses incurred by each type of vehicles, taking into consideration the cost of the new benefits contained in the new (Civil Liability ) policy.
The companies were asked to entrust their commissioned actuaries to study the two policies so that the study includes providing the Authority with foundations and assumptions relied upon to get the price and the amount of the price seen fair for the vehicles as per the attached models. The study shall put the following aspects into consideration:
- Loss rate achieved by this section; both regarding civil liability and loss and damage, each individually.
- Administrative expenses rate and production expenses, including the brokers and agents' commission.
- A reasonable profit margin.
- Hence, the decision that will be issued by the Authority will have to take all points into consideration, and any violation of what will be issued by the Authority will not be tolerated.
12) The proportion of the insurance companies' commitment to the process of separating life insurance accounts from general insurance?
The Insurance Authority's Board of Directors has issued decision No. (10) for 2016 regarding the instructions related to the organization of the existing companies that combine people insurance, funds formation and property and liabilities insurance, which established the rules of complete separation between the indicated insurance operations in terms of technical, financial, technical, administrative and legal procedures, as well as the insurance companies' commitment to prepare financial reports and statements required by the law on a unified basis and on a separate basis for people insurance, funds formation and property and liabilities insurance.
Accordingly, the existing companies that combine the two types of insurance have complied with the required separation process and committed to the board's decision referred to above.
13) How do you assess the performance of takaful companies in the UAE and what are the mechanisms to maximize the profitability of the sector?
Takaful insurance companies works have been regulated under Law No. (4) of 2010, which is considered the best of its kind in the Arab region and the most comprehensive in the Islamic world. Many Takaful insurance companies have been founded so far, amounting to (11) companies with a turnover of about AED 9 billion.
Takaful companies' works have been focused in two insurance branches; vehicle insurance / health insurance, while the technical and financial rules for insurance companies requires finding some kind of balance in the formation of the company's portfolio to make a portfolio of diversified branches and balanced dangers. Thus, it is noted that the takaful companies' performance has been affected by several factors, including the decline in return on investment and price competition in the market.
Based on that, we realize a need to maximize the profitability of the sector by creating new and innovative insurance products and coverages to meet and fit the needs of different customers in addition to the presence of specialized and qualified staff to work in this type of insurance activity.
Fourth: Smart services and Emiratization
14) - What are the steps taken by the authority in terms of transformation to the smart services?
Over the past years, Insurance Authority has achieved great moves and leaps in the transition marsh into a smart entity in delivering services to its customers, and it is making constant efforts to raise the level of insurance services in order to cope with the directives of the wise leadership in the development of the business environment and government performance and adopt competitive smart services .
In this direction, after the launch of His Highness Sheikh Mohammed Bin Rashid Smart Government Initiative, the authority has converted all convertible services to smart services, amounting to (51) services, which contributed to saving time, effort, cost reduction, developing business performance in the Authority and local insurance market and promote business performance competitiveness in the UAE.
The percentage of intelligent electronic switch for all services of the Authority reached 100% according to 2015 Telecommunications Regulatory Authority report
The authority has also worked on simplifying their procedures to make all its services convertible and has also made a link with the relevant authorities for this. Thus, a new range of services have been launched up to 45 intelligent service. Meanwhile, new smart services have been developed to facilitate the delivery of services to customers, such as the automatic renewal service through which 8 steps have been reduced to one step only.
The Authority has also provided the smart services through more than one channel, such as applications on smartphones and applications on mobile phones such as SMS and IVR channels to inquire about transactions, as well as developing new smart applications to make it easier for customers such as the central reminder application that connects all departments' requirements with customers from one place, gives them the ability to plan in the beginning of the year and follows the developments and all taken and relevant actions.
The Authority has also worked on providing a smart reading application to encourage summarizing and reading in various fields and provide the public, customers and staff with a knowledge and reading base.
15) What is the current Emiratization ratios and the Authority's plans to increase them during the next phase?
Emiratization in the insurance sector is a strategic objective of the Authority and one of its top priorities, at the same time, the Authority's realization of Emiratization in the insurance sector is comprehensive, from a qualitative point of view as well by increasing the numbers of citizens in this sector, training of national talents and rehabilitating them scientifically and technically at all levels.
The Authority will continue to take more practical measures to increase the Emiratization ratios in the insurance industry and raise the level of skills and experience of the citizens working in the sector. A detailed plan has been developed for implementing the Cabinet decision of 2015 concerning the Emiratization strategy adoption in the banking and insurance sector, as workshops and individual meetings are currently being held with insurance companies in order to facilitate and regulate the application of the Council of Ministers Decision on Emiratization in the financial sector. The Authority has completed the preparation of the Emiratization Handbook in insurance companies.
The Emiratization ratio in the sector reached (12%) at the end of 2015.
16) What is the number of complaints since the beginning of the year until the end of last October and their classification?
The Authority is keen to develop the role of the insurance sector, improve its performance and strengthen the competitiveness of the local insurance market by carrying out a supervisory and regulatory role on the insurance companies and insurance-related professions to ensure regulating and supervising the insurance sector in accordance with the best legal bases in the global insurance industry, ascertain the extent of the companies' compliance to relevant legislation and make sure of the integrity of the technical and financial positions for businesses and professions related to insurance and the extent of its observance of the technical foundations for the conduct of insurance and reinsurance operations.
The number of complaints received by the Authority from policyholders regarding the insurance companies and associated professions reached (6035) complaints during the first ten months of 2016 and the authority has succeeded in settling (5736) complaints by a (95%) settlement percentage. Most of the complaints have been focused on the vehicle insurance sector by a 92% percentage, in addition to health insurance and life insurance.