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With compulsory motor and medical insurance dominating the retail insurance market in this region, people tend to overlook the importance of life insurance products and the financial security they can offer in the event of death or critical illness.
Despite the availability of a broad range of both conventional and Sharia-compliant Takaful life insurance products, a low penetration rate of under one per cent in the Middle East and North Africa (Mena) region suggests that this relatively unknown market is in need of a major awareness and education campaign to realise the huge growth potential it has.
Providers of life insurance products play a key role in tackling the issue of this underinsured population and in order to raise awareness amongst consumers, it's up to the industry to encourage and support the professional development of the region's advisers who typically work for banks, insurance brokers or insurance companies.
The growth of bancassurance within the region has largely been built on the distribution model of selling life insurance as a product. The success of life insurance around the world in developed insurance markets has been built around the model of "needs based advice" as opposed to "product selling". There are excellent life products available within the Gulf but their real value is lost if they don't meet the needs of the client.
In the words of St Francis of Assisi, "understand before being understood". Needs-based selling centres around advisers building robust detailed understanding of their clients' requirements and needs. Appropriate advice can only be given once clients' current status in terms of assets and liabilities is known along with identifying their future goals. With this knowledge appropriate insurance products can be delivered as a solution for clients.
Inappropriate product selling can lead to clients cancelling plans that they don't see as relevant to them. This does not make financial sense to the client, the adviser or the insurance company. Advising clients to effect life insurance plans that meet their needs and then regularly reviewing these with clients ensures that changing circumstances are covered through the use of relevant insurance products. This makes financial sense to clients, advisers and insurance companies.
There are a number of insurance brokers and banks within the Gulf that have taken the lead in developing and accrediting their advisers in terms of professional qualifications. In addition many have adopted the "needs-based" advice model which is leading to increased consumer understanding of life insurance within the region. For making it the "standard model" across the region, the industry needs to invest in ongoing training for advisers. This incurs an upfront cost to institutions but the return on investment can be seen through the increased persistency of business as clients seek to honour their ongoing commitment in terms on regular premiums as they understand the value of the life insurance that they have effected.
This is an exciting time for the life insurance market in the Middle East and the industry is on the verge of a massive expansion. In a market where these products are still relatively unknown, accreditation and awareness challenges should be acted on quickly to make sure that the reputation of this burgeoning industry isn't damaged before it's had time to prove its worth.
- The writer is general manager, Friends Provident, Middle East.
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