Adrian Flowers, CEO of SABB Takaful, discusses the insurance market in Saudi Arabia with Team IFM.
August 5, 2014:SABB Takaful is a leading and trusted Islamic Insurance provider in Saudi Arabia, operating according to the principles of Shariah. All its products are reviewed and approved by its Shariah committee before being made available to customers. Excerpts from an interview:
Adrian Flowers, CEO, SABB Takaful
How would you describe the growth of the Protection & Savings (P&S) business in Saudi Arabia?
It’s been solid – accounting for around 4% of Gross Written Premiums (GWP) in 2012. We see great potential in the long term. This is still a young market and more education of the market is needed by the industry before it really starts to take off.
What are the growth drivers for the expansion of life insurance in the Kingdom?
I think the growth will come from the dynamic demographics of Saudi Arabia. The population is expected to grow at a Compound Annual Growth Rate (CAGR) of 2.1% between 2011 and 2015, which is almost twice the global average of 1.2%. Once they enter the labour market, this young population will significantly increase the demand for insurance. When they start to have families, they will also start to think more on how to protect their wealth and save to educate their children, etc.
Regulatory changes are also likely to be drivers of growth, as we saw when the Saudi Arabian Monetary Authority (SAMA) announced mandatory health insurance in 2006, which led to an increase in value (CAGR) of health insurance premiums of 31% a year between 2006 and 2012. SAMA will continue to have significant influence over the future of life insurance (Family Takaful) in Saudi Arabia.
How much positive benefit do you foresee for the life insurance sector from the recent introduction of the mortgage law? What are you doing to prepare for it?
Generally speaking, we see it as a positive move because it will expand the market and, therefore, people will need to protect those assets, which will present opportunities for the insurance industry. This is also an opportunity in terms of providing portfolio insurance for the companies that are providing mortgages to the sector. We are particularly well positioned because we already deal with the most significant mortgage providers and finance company providers in Saudi Arabia. I think it’s going to take time for it to really start to take off though and is not something that is going to happen overnight. We are still waiting for the SAMA regulations to be clear about how the market is going to operate.
Could you explain the distribution dynamics for life insurance business in the Kingdom and how it is developing? Do you see a need to further enhance distribution?
We distribute through an agency in SABB branches, which means we can tailor a financial package to suit all the wealth management needs of the client. By working with a trusted partner in SABB Bank, we can promote first class customer service through the branches and directly with customers.
To further enhance the distribution, continued education and training of staff is improving the professionalism of the sales people. They feel confident about discussing the products and in dealing with customers’ questions. It is vital that the industry has professional people who are well-trained in dealing with a client’s Takaful needs, and in putting the customer first.
Do you see a need for specific regulations that would allow life insurance to thrive in the Kingdom?
The regulations are already pretty much there. I don’t see the need for any more direct regulation right now. The products are available. The regulators can assist the market by promoting insurance and the benefits of it to both the public and corporate entities.
This would be helpful to the industry and to the population of Saudi Arabia. The insurance industry also needs to promote itself in a cohesive way.
What do you see as your main growth drivers in the next 12-24 months?
We are focusing on Life, Marine, Property and Employee Benefits, such as Group Life business. This is where we believe we can add most value to customers. We see them as being the main growth drivers, because they are adding significant value to a sector within the market, but maybe are under-served at this time.
What do you see as the biggest operational challenge affecting Saudi Arabia at the moment?
Distribution is the biggest operational challenge for the reasons mentioned above in terms of having the skill set to build, develop and sell insurance products. Market awareness on the retail side, for life and protection-based products, also needs to be raised. We are very excited about the future prospects for growth of insurance in Saudi Arabia.
What do you think would be the best solution to address those industry challenges?
We need continued positive dialogue with the industry and the regulator to improve insurance awareness and skills in the Saudi Arabian market. At the same time, we must listen to what customers want and need, and provide value-added products that address these needs. We must also develop digital solutions, so that customers can reach us in any way they wish.
