TLDR For the common good the policyholders will corporate with each other.
The contribution of the policyholders is considered donations.
To help those who need assistance, all their policyholders will pay their share.
The liabilities are shared according to the pooling system of the community and losses are divided.
According to compensation and subscription, there is no uncertainty.
So many interesting things to see within news feeds, and always too much to keep track of within InsurTech. When I came across this news piece, “InsurTech to drive sector growth in UAE”, (penned by Sandhya DMello ), I just had to dig in and see what the Khaleej Times (KT) was referring to. When is the last time you read about insurance happenings in the GCC, ( not including tensions, shipping issues, etc.), and what do you know about insurance in the region?
Ms. DMello summarized well some efforts underway within UAE to embrace InsurTech- albeit predominant efforts in the region began only within the last year. If one considers that fintech’s stepchild, InsurTech, has gained traction in other areas of the globe since 2015-ish, it can be said that ‘defined’ innovation efforts in the GCC are a little late to the InsurTech dance. But that’s not a bad thing.
The KT article included the apt observations of three InsurTech advocates, one of whom is Sridhar Subbaraman, founder and owner of Oasis Insurance Group. Mr. Subbaraman, a veteran of the insurance world for some decades, acknowledged that:
“The real InsurTech penetration has commenced only from the beginning of 2019 through www.insureatoasis.com with regard to sales and distribution and as recently as last week, five insurance companies[1] have agreed to secure their recoveries through a blockchain launched by another start up, Addenda[2].”
UAE and elsewhere in the region (Saudi Arabia, Bahrain, Oman) are no newcomers to technology innovation, as the respective countries/kingdoms are fully embracing technological advancements, and sovereign wealth funds (regional and global- see the region’s participation in the Softbank funds) are able supporters of regulatory and institutional innovation. There also is the growing recognition that, “Businesses should look at technology as an enabler, as one of the key factors that drives growth.[3]” Hmm…reads like #innovatefromthecustomerbackwards, a favorite hash of the Insurance Elephant.
A look at Oasis Insurance and its operations in the UAE provides some clarity in how the firm sees innovation taking hold in the region:
- Develop and be part of an insurance supply chain ecosystem
- Enable real time digital distribution
- Leverage experience to create a digital platform with direct connection to a panel of participating insurers (of which the firm has nine collaborating carriers)
- Complete the development in a financially sustainable form without significant debt or losses (profitable bootstrapping?)
- Use of open APIs (application programming interface) allowing ease of connections with legacy systems
Sounds somewhat familiar to InsurTech observers, doesn’t it? In the instance of Oasis and its partner carriers there will be wider choice for customers, ease of price comparison, and low CAC involving a healthy number of customers.
And don’t be fooled by what thinking might be of the size of the insurance market- the transition is underway or potential in markets such as:
- United Arab Emirates- GWP (2017) of 44.8 Billion AED, ($12.19 Bn US)
- Bahrain- GWP (2017) 268 Million BD, ($712.8 Mn US)
- Kingdom of Saudi Arabia- GWP 36.5 Billion SR, ($9.7 Bn US)
And is being implemented within markets where parallel traditional insurance carriers operate alongside P2P/mutual Takaful[4] carriers within government regulations and Shari ‘A oversight. Not too bad of a start.
Mr. Subbaraman fully expects in H1 2020 there will be not only more insurance companies adopting digital distribution strategies, but also more insurance products available to compete, including micro-policies and parametric cover, and more ‘Middle Government’ initiatives for startups, including www.fintech.difc.ae (Dubai International Financial Centre, DIFC), www.fintech.adgm.com (Abu Dhabi Global Markets- Innovation Hub), and Mohamed Bin Rashid Innovation Fund- www.mbrif.ae . And not to be left behind, fintech sandboxes have been created within the KSA and UAE.
So, not new steps within the region per InsurTech history found elsewhere, but adaptation of innovation per the expectations of the business and culture of the region. Opportunity for digital growth, customer ease of access, and expansion of products available to the population. Something new under the Mid-East insurance sun.
[1] Watania Takaful, Noor Takaful, Al Wabtha Insurance, Aman Insurance, and Oriental Insurance.
[4] “Takaful concept is a cooperation between policyholders, who make a contribution which is based on donation to a specific fund which covers the occurrence of potential risks. The fund is managed by the company (Takaful Operator) in return of consideration (fees/Wakala)” What is Takaful?
Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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