Trends That Could Shape The Future of UAE Insurance Industry

• Zurich Insurance Group’s ‘Shaping A Brighter Future of Work’ report reveals some fascinating insights at what may lie ahead for the industry in a post-Covid world.

Zurich International Life in the Middle East (Zurich) has revealed some key insights for the future of the industry in the UAE, thanks to the ‘Shaping a Brighter Future of Work’ report just published in collaboration with Oxford University.

The study distilled local market nuance and texture from 17 of Zurich’s markets across five continents, gathering insights about national economic responses to the pandemic and how the future world of work and social protection has in many ways already arrived.

Zurich also gathered up-to-the-minute, on-the-ground views from the UAE on five topics: how Covid-19 is reshaping the landscape of reskilling efforts in the insurance industry; pension provision; insurance and protection trends; Covid-19 vaccination impact as well as ‘duty of care’ as a concept.

1. Reskilling in the UAE – a more systematic, holistic approach?

Research in the UAE reveals that most large insurers do contract third-party providers for upskilling and retraining for a range of expatriate staff, but mostly on an ad hoc basis. We predict a wider, more systematic approach to upskilling in the future. A good indicator is watching the approach of forward-thinking organisations such as the Dubai International Financial Centre (DIFC), which through its FinTech Hive, is not only actively looking at promoting companies in this space, but is proactively upskilling and mentoring staff.

In terms of Emirati development, the Central Bank of UAE is pushing insurers to recruit Emirati talent to develop and upskill this home-grown workforce, particularly actuarial staff.

2. Pensions – a move towards more flexible End of Service (EOS) schemes?

Currently, end-of-service benefits in the UAE are given to employees as a lump sum payment, in lieu of other financial benefits that expat residents might expect in their native countries. The final settlement amount is a function of the employee’s final basic salary, contract type and amount of years served in the role and is defined under the UAE Labour Law.

Marking an innovative development, DIFC announced its DIFC Employee Workplace Savings (DEWS) initiative, which sees a gratuity paid by the employer monthly. The monthly gratuity goes into a trust under the independent legal ownership of a master trustee and operates under supervision by a financial regulator. After a thorough research and selection process, DIFC selected Zurich Workplace Solutions (Middle East) Limited (a subsidiary of Zurich International Life Limited) as the scheme administrator to manage enrolment, contributions, withdrawals, etc.

Offering unique flexibility, the total gratuity paid this way is put into low-cost, long-term investments with the goal of growing employees’ wealth. It also allows employees to have more control over their long-term savings through their own voluntary contributions to the fund.

With DIFC offering an alternate model with its DEWS scheme, which sees employees actively contributing to their EOS benefits, while offering complete transparency, it’s a reasonable assumption that such innovations may lead to wider EOS benefit changes in the UAE market across a range of industries and sectors in the future. 

3. Insurance and protection trends – a transition to new flexible business models?

With life insurance penetration in the UAE currently at 0.5 per cent, there will likely be a growth in the life insurance segment, especially when one considers that Covid-19 has increased awareness of financial and health risks among consumers. This has resulted in increased demand for life insurance and related products.

Despite the increase in demand, Covid-19 has significantly impacted distribution capabilities on the intermediated side of the industry, which relied on face-to-face contact – an obviously unworkable model during the past 15 months. As a result, the pandemic has ushered in a renewed focus on the ability to reach consumers directly via digital means.

On the macro-economic level, the UAE is currently projecting normal rates of growth, which would support demand growth across both the insurance retail and group segments.

4. Covid-19 impact trends – no material change to related risk calculations or pricing anticipated

It is unlikely that preferential health-related insurance contracts will be offered to individuals on the basis of vaccination against Covid-19. Without long-term scientific data on longevity and impact, and with a need to account for several different types of vaccines and their efficacy rates, pricing these risks is not possible.

In practical terms, everyone is expected to be vaccinated in the UAE within the next year, so a material pricing difference is unlikely. Deaths per capita of the infection rate are very low in the UAE, so vaccination would not materially change risk calculations.

5. Duty of Care – a substantial corporate shift towards the international model?

The idea that employers owe their workers a duty of care is clearly represented in large multinationals operating in the UAE. It is recognised from an ESG (environmental, social and governance) perspective as having a positive impact on profitability. Companies that look after their staff will benefit in the longer term through better retention, engagement, and happiness scores.

Walter Jopp, CEO of Zurich in the Middle East, said: “While it’s a challenge to predict trends, one thing is certain – the pandemic’s economic impact has given rise to different innovations in business systems, their coordination, and labour productivity. One particular insight gleaned from our research is that the digital revolution has provided employees and businesses opportunities to adapt and indeed even prosper during the pandemic.”

“While it remains to be seen how the regional industry overall adapts and evolves in response to recent challenges and opportunities, at Zurich, we remain committed to offering our customers world-leading products and services at a local level across the Middle East.”

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