PwC has launched a report that identifies key trends affecting the Middle East’s insurance industry and highlights the necessary long-term changes for the region’s insurers to adapt to a fast-changing global business environment.
According to the professional services giant, the events of 2020 led to unprecedented changes within the insurance industry, with insurers being met with escalating obligations to policyholders, including increased life and health claims. However, many insurance firms also went above and beyond their duty to support their customers and business partners. These include offering free insurance to first responders, premium holidays, and policy term extensions.
The report identified three key trends expected to greatly affect insurance in the Middle East:
The digitisation agenda
PwC said that automation and AI are already changing the way insurers interact with consumers across the value chain—from product design to underwriting, pricing and claims. Recent advancements in the digitisation of client interactions have included the growing use of bionic advisers that integrate human and digital client experiences. Technology has made it possible for life insurers to predict and intervene in health events based on a simulated digital twin of a customer. PwC said that to thrive in the current industry landscape, insurers must embrace the digital revolution, with those who can innovate and adapt quickly more likely to succeed.
Reimagining customer value
In a highly competitive market, insurers must reimagine how they serve customers, provide advice, and capitalise on new partnerships and innovative engagements, PwC said. It highlighted the insurtech phenomenon as a strong example of addressing customer needs in real time by utilising data and technology to create tailored experiences and products. While insurtech is still at an early stage in the UAE, PwC said that there are promising examples of insurers and start-ups working together to use new technologies for the benefit of customers. Insurtech accelerators have also are also becoming more common in the Kingdom of Saudi Arabia, coupled with the penetration of insurance aggregators, taking around 10% to 15% of the insurance market share.
Focus on sustainability and ESG
Climate change poses systemic physical and transition risks to the insurance industry. To address these risks, insurers will need to develop a deeper understanding of environmental issues in their portfolios, as well as rebuild their risk models and pricing assumptions. While the industry is only beginning to understand ESG implications and integrate ESG into their businesses, PwC said insurers are now looking at ways to integrate long-term sustainability, not only for shareholders, but in order to have a positive influence on society and the environment.
“We expect to see more consolidation and M&A activity in the regional insurance industry as regulators continue to tighten their supervision regime, particularly around capitalization/solvency,” said Sanjay Jain, partner, financial services and insurance leader at PwC Middle East. “We also expect to see more product differentiation, with new products and features to be introduced in the market.
“As we look to 2025 and beyond, insurers must harness the momentum they have gained to meet a host of new difficulties. These include macroeconomic and structural headwinds, volatility and increase in interest rates, increased demands regarding climate risk, IFRS 17 standards going live, and the exponential growth in digital innovation. Regardless of how insurers capitalise on these trends, they will need to reassess the future and reimagine their place in the world.”