Life insurance is the top financial priority for almost 50 per cent of people living in the UAE in the wake of the pandemic outbreak, a study has revealed.
The study's findings have added relevance in the wake of the landmark life insurance regulations issued by the Insurance Authority last year in the UAE, where the penetration rate is below one per cent per the last available data of 2018.
While 51 per cent of the respondents called out savings as a key priority retirement planning highlighted by 32 per cent of those surveyed, became more significant with the age of the respondent, the survey conducted by YouGov found.
"The unprecedented nature of Covid-19 with the rising rate of infections and the increasing death toll across the globe has altered the mindset of individuals," said Walter Jopp, CEO of Zurich in the Middle East.
The life insurance sector in the UAE has been undergoing significant change following the issue of comprehensive new life insurance regulations by the Insurance Authority (IA), which came into force on 16 April 2019. The regulations impose controls on the commissions that are payable to distribution channels, including insurance brokers, agents, banks and finance companies. The regulations put caps on the overall amount of commission and the manner in which it can be paid, and also restrictions on the charges, including surrender charges, which insurers can life levy.
According to analysts, the UAE life market has been fraught with a lack of consumer protection and control over commission payments linked to certain life products. "This has unfortunately encouraged a lack of integrity in the market through various third party distribution channels, resulting, in some cases in 'mis-selling'. The essence and body of the new regulations address these concerns to a large extent and are a welcome change to the UAE life insurance market."
In 2018, the life insurance penetration rate in the UAE was 0.7 per cent. However, the UAE recorded the highest insurance penetration and density at 2.9 per cent and $1,194.7, respectively, in 2018, according to Alpen Capital. Insurance penetration in the region is expected to remain between 1.8 per cent and 1.9 per cent from 2019 to 2024, below the global average of 6.1 per cent, offering scope for growth in the sector. Insurance density in the region is expected to increase from $502.9 in 2019 to $555.8 in 2024.
The insurance industry in general is expected to witness moderate growth in the face of improving fiscal activity and macro-economic factors, according to a report by investment bank advisory group Alpen Capital.
In 2019, the UAE insurance market continued its trend for a third consecutive year with an overall increase in their profitability along with premium growth in 2019, according to a market report by Milliman. "Based on the preliminary disclosures (22 companies) and audited reports (eight companies) of the UAE insurance companies listed on the Abu Dhabi Securities Exchange and Dubai Financial Market, the Gross Written Premium (GWP) grew by 8.3 per cent to Dh23.7 billion in 2019 following a small increase in 2018. The increase in premium was primarily due to movements between listed and non-listed insurers," said the report.
According to the YouGov study findings, 46 per cent of UAE residents had indicated that life insurance is more important than before Covid-19. The sector now ranks over four times higher than travel insurance and 3.5 times more than property insurance, home finance and car loans, said the survey report.
Almost half of survey respondents indicated that they are likely to purchase a life insurance policy online during the pandemic period. Trust in the insurer, affordable premiums and simplicity of terms and conditions are the most important factors when buying a digital life insurance solution, said the report.
"The previous misconception of "it won't happen to me" has been set straight and people are now coming to terms with the fact that the unexpected does happen and it can happen to anyone and everyone," Jopp said.
"The pandemic is also changing the attitudes and preferences of how consumers want to purchase goods and services - this includes the consumption of financial services. With anxiety surrounding physical interaction with others, individuals are looking at ways to make purchases online from the safety of their homes and at a time of their choosing," said the report.
Almost half of those surveyed admitted that they were likely to buy a digital life insurance solution online. - email@example.com
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