DOHA: The growing fiscal constraints faced by Qatar and other oil exporting GCC countries may be a blessing in disguise for the insurance industry. The situation may lead to a rise in the demand for insurance services, especially for health and life insurance products, which will boost the region’s insurance penetration levels.
The average insurance penetration ratio (measured as a percentage of premiums to a country’s GDP) in GCC region is nearly 1.5 percent, which is less than one-fourth of the global average of over 6 percent.
Commenting on the reasons of the low insurance penetration in Qatar and other GCC countries, experts from the industry suggest that apart from the cultural and religious factors, one of the most important reasons for low demand for health and life insurance products in the region is the governments’ proactive approach towards risks faced by people.
“Low insurance penetration in the region is due to the low popularity of life insurance products. There is much debate about why people do not insure against the risk of premature death. Local culture and religion may be the important reasons, but I am not competent to comment on this. However, one of the most important reasons, for example, is the dominant role of governments as the ultimate observer of risks,” said Dr Kai Uwe Schanz (pictured) , the Chairman and Partner of a Zurich-based consultancy, Alms & Company AG.
“But the growing fiscal constraints (on the part of governments due to dwindling oil and gas prices) in the coming years can create more room insurance services resulting improvements in the insurance penetration in the region,” added Dr Kai.
He said that another driving force for rising demand insurance penetration could be the compulsory motor and health insurance products.
Citing Saudi Arabia as a case of his point, he said that after the announcement of compulsory health insurance for all the people living in the Kingdom, the insurance penetration level in the country doubled.
However, when compared with advanced countries such as Japan, the UK and South Korea (whose insurance premium-GDP ratios are more than 10 percent), the GCC countries will be required to channelise a lot of hard efforts to improve the situation of insurance sector, which is a critical industry for any economy.
Earlier this year speaking at a forum, the Minister of Finance, H E Ali Sherif Al Emadi noted that Qatar’s insurance sector has huge growth potential as the total volume of untapped insurance premium can reach up to $12bn (about QR43.70bn) or even more if the country achieves the insurance penetration level of 6 percent of GDP, currently the global average.
According to latest available data Qatar’s insurance premium in 2015 accounted for little over 1 percent of the GDP which stood at $2bn (about QR7.28bn) for the year.
