The Middle East's insurance industry is going through a huge amount of change right now. And most of that change is being driven by the shift towards digital channels.
With the continued growth of e-commerce in the UAE - the Dubai Chamber of Commerce and Industry estimates that the country's e-commerce market will be worth $10 billion by the end of 2018 - the local insurance industry is having to contend with changes in consumer behaviour. As a result, the insurance aggregation model is fast becoming the best way to distribute insurance in the country. Just two years ago, online car insurance sales accounted for less than one per cent of the UAE's market, but today that number is closer to 10 per cent.
As in Western markets, aggregators are quickly becoming the preferred channel for Middle East consumers looking to buy insurance. The growth we've seen over the past two years illustrates how much latent demand there was for the industry to move online.
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However, while this shift is happening rapidly, there's a long way to go before the industry catches up to the likes of Europe or the United States. We pride ourselves on the high-tech front-end, but around the back some manual intervention is still required in the majority of cases. We expect insurers to continue to invest in technology with the ultimate aim of moving towards an entirely automated process.
When those innovations are commonplace, there'll be good news for consumers, who'll see cheaper premiums thanks to the lower operational costs borne by insurers.
But on the other side of the equation, as the industry moves towards an automated, technology-based marketplace, there is a big opportunity for progressive insurers to gain market share. One example of this forward-thinking attitude can be found in National Takaful Co, or Watania, which was named 'Most Progressive Insurer' at the yallacompare Banking and Insurance Awards 2018. This is an insurer that has embraced the aggregation model and sought to use it to gain a competitive advantage.
Murali Aravindakshan, head of sales and distribution at Watania, recently said that the company is pleased to work with leading aggregators as their business was helped enormously in a relatively small amount of time. In fact, aggregators are helping Watania shape new products, with the largest of us providing much-needed data with which to identify gaps in the market.
We've always believed in taking a partnership approach to working with insurers - what's good for them is good for us. But the happy result of all of this work being undertaken between insurers and aggregators is that consumers are netting real savings for consumers.
That's obviously hugely important in a time of relatively low consumer confidence. Our Consumer Confidence Tracker for the first quarter of 2018 found that over 40 per cent of UAE residents are less confident about their finances than they were at the same time last year. By offering exclusive insurance rates, aggregators help to alleviate at least some of that stress.
Going forward, we expect the aggregation model to continue developing in the Middle East. Indeed, I wouldn't be surprised if, within the next decade, the UAE mirrors other markets with the majority of insurance transactions taking place through aggregators. In more developed markets, where aggregators account for around 70 per cent of insurance sales, we'd expect the aggregator to be the most common sales channel for Middle East insurers by 2022.
And others have seen the opportunity, too. We've shone a light on the industry, and now the market is full of competitors - which says something about its inherent strength. Some of those competitors have already left, but on the whole, competition is a good thing. It'll bring more insurers online, and it'll drive innovations that result in less expensive premiums.
And while these innovations have largely been confined to the UAE so far, we're already looking to the wider Middle East. Change is afoot.
By Jon Richards
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