Can technology rescue the Middle East’s insurance sector?

June 11, 2017

Insurtech could inject new life into the Middle East’s lagging insurance sector, but more than that, it could help companies reach brand new customers.

Technology has the power to disrupt the insurance sector in the Middle East, transforming the types of products on offer and finding new ways to reach customers.

Insurance has always had a low penetration rate in the Middle East and that rate is staying stubbornly low, despite the growing GDP of the region.

Jonathan Rawling is CFO for, the first – and one of the few – websites in the region that allows customers to compare and buy insurance online. He points out that the average insurance rate in the Middle East is just 2%, in contrast to North America and Europe, which average 7%.

Life vs. non-life

Sectors such as car and health insurance are enjoying modest growth, particularly as mandatory health insurance laws are introduced in the UAE and Qatar, for example. But life insurance in particular has failed to take off.

“What we really see is that very few markets have a significant life insurance segment,” says Rawling, “and there are a couple of reasons for that.

There are very generous social welfare schemes across the region, so the idea that people need to provide for their families after they’re gone is not as prevalent. In addition, there are cultural beliefs linked to religion that are incompatible with the idea of life insurance.

On top of that, home ownership and mortgages are relatively low. In Europe and the US, people often first encounter life insurance as a requisite of buying their own home with a mortgage.

The price of a lack of customer awareness

Perhaps the greatest barrier to insurance penetration is the lack of technical innovation in the sector. Across the Middle East, customers often don’t know about insurance – and if they do, they usually have to go to a bricks-and-mortar establishment to buy insurance products.

Marketing technology that reaches customers through their social networks, mobile phones and websites could do a huge amount to improve financial literacy among potential customers. Insurance technology (insurtech) could greatly accelerate penetration once customers know what they want.

“From the customer side, people are absolutely ready for this. We have some of the highest broadband penetrations in the world and some of the highest density of smartphones – people are absolutely ready for ecommerce,” Rawling says.

The rise of FinTech

On the industry side, the sector is still lagging, but government institutions in countries such as Saudi Arabia and the UAE are working to support fintech in the region. A report from Wamda Research Lab and Payfort predicts that MENA fintech startups will raise $50 million in funding, a 270% increase on 2016. Many of the startups are based in the UAE, but countries such as Lebanon, Jordan and Egypt are beginning to catch up.

With a highly tech-savvy population and investment into fintech and insurtech being supported by local governments, it’s only a matter of time before the way that insurance is packaged and presented will change. According to a paper from Michael S. Jensen, Managing Director MENA Zone at AIG, the two major disruptions will be in data analysis and customer engagement.

Data is king

Data analysis is set to be entirely upended by the advent of the Internet of Things and the proliferation of smart devices. Estimates suggest that, globally, there will be more than 50 billion connected devices by the end of the decade. In the Middle East, Dubai is well on its way to becoming one of the world’s most connected cities and other areas in the region are following suit.

With smart devices recording everything from how we drive to our health, the insurance sector has the opportunity to develop highly tailored products for individuals in real-time with an unprecedented level of detail.

Insurtech like this will drive huge change in the industry across the world, but it won’t make a difference in the Middle East unless insurance companies start to reach their customers and engage them.

“Customers expect the same ease of use, access and transparency from their insurers as they get, for example, through mobile banking or car-sharing apps. To achieve this, insurers must not just embrace technology, but further drive its development and application throughout the entire organisation,” says Jensen.

Businesses require the right blend of talent and experience in their ranks, from digital to HR to marketing, to enable this transformation. Only then can the insurance sector develop and serve its customers effectively.

Engaging customer expectations

The development is going to take some time. For example, works very differently from a website like because of the technical immaturity in the market, Rawling explains.

“We haven’t even gotten to the stage here where insurance companies are selling directly online,” he points out.

On and other similar sites, when a customer inputs their data, that data is then sent electronically to hundreds of companies who process it and produce a quote to be sent back electronically in moments. But has to do all those calculations on their own systems, because the insurers they’re dealing with don’t have the technology to electronically produce quotes on demand.

Culture concerns

Companies will need to pour a lot of investment into technology to meet customer expectations. But they will also have to address the cultural issues that might hamper greater uptake of technologically enhanced insurance products.

“Valid concerns about privacy and the security of personal data are prevalent, while there is a general cultural aversion to data being collected on individuals’ behaviour. Insurance firms must work to address and assuage these fears, and demonstrate to customers the tangible benefits of real-time data collection and utilisation – particularly in some of the more conservative societies in this region,” says Jensen.

Informing your audience

There will always be the challenge of cultural issues.

Rawling says: “But what we can and should change – and I would say what we are changing in our business so far – is to increase transparency. If you can increase transparency, increase awareness and put people in a confident position where they feel they can read about and understand these products and make an informed choice for themselves, then definitely technology can make a difference.”

Although the Middle East needs technology to improve the insurance products on offer, technology can also do something much more fundamental – talk to brand new customers for the very first time.