Insurance Business in Qatar: Opportunities and Challenges
Insurance Business in Qatar: Opportunities and Challenges
Introduction
The Organisation for Economic Co-operation and Development (OECD) (2014) stated that the global insurance industry has been performing well and registering growth since its recovery in 2012 after the financial crisis. The growth is more evident in the emerging countries in Asia and Latin America particularly in the life insurance sector (OECD, 2014).
The same source also noted that the non-life insurance sector continue to be in the recovery state until 2013 adding the fact that calamities all over the world negatively impact the sector. Nevertheless, the motor vehicle insurance increase premiums in other countries and drove the limited growth in the non-life sector (OECD, 2014).
Low interest rates, uncertainty in the macroeconomic environment, and unfavorable regulations remained constraints in the insurance industry, and the European Union aims to Solvency Directive II for the intercommunity insurance market as a form of risk management strategy (OECD, 2014).
Insurance Industry in Qatar
The insurance business in Qatar is generally a good opportunity due to the low presence of the insurance companies in the state which can be attributed to the conditions stated in the article of Jayson Majid of Clyde and Co. Jayson Majid (2015) stated that the law of Qatar mandates that any insurance business must be registered at the Ministry of Business and Trade with a minimum capital requirement and with the legal form of joint stock company, the only allowed legal form.
Other restrictions of the law may include the limitation of insuring properties by only the Qatar nationals’ insurance companies and the non-recognition of the insurance brokers by the law. The insurance agents must also be Qatari national or Qatari wholly-owned subsidiary (Majid, 2015). The Qatari law in 1971 also prohibited the foreign companies from operating in the insurance industry in the stat, while the law in 2008 allowed the Gulf Cooperation Council insurance companies to operate in Qatar (Majid, 2015). Majid (2015) said that the state aimed to insure all its residents and visitors by the end of 2014 or early 2015.
The insurance sector has low penetration rate of .63 percent in 2012 according to Oxford Business Group (2015) translating to large room for growth. An article from The World Portfolio (2015), Qatar, as an energy-based country, is one of the fastest growing countries in the insurance business owing to the mandatory schemes in the increasing infrastructure projects that boosted the sector through property/infrastructure insurance. Its insurance industry is expected to increase by 6.7 percent CAGR until 2017 (The World Portfolio, 2015).
The leading local insurance company is Qatar Insurance Company which holds over 50 percent market share and is the highest Standard and Poor’s rating insurance company in the Gulf Cooperation Council (The World Portfolio, 2015). The source also specified other players that account for less than 50 percent of the market share including Qatar Islamic Insurance Company, Qatar General Insurance and Reinsurance Company, Doha Insurance Company, and Al Khaleej Takaful Group (The World Portfolio, 2015 and Oxford Business Group, 2015).
The World Portfolio (2015) also stated that the World Cup event and the growing construction and engineering projects may drive the expected higher than 70 percent growth in the non-life insurance sector due to expected high demand on property insurance. Other required schemes that positively impacts the Qatar insurance industry and its subsectors include the 2013 decree mandating health insurance for employees and companies operating in Qatar, compulsory third-party vehicle insurance, Takaful packages for the benefit of life and health insurance, and further improvement of the underdeveloped life insurance sector.
As the life insurance sector in Qatar remained underdeveloped up to the year 2015, it is wise to focus on the sector as an insurance business due to the large growth opportunities and relatively untapped subsector. As noted earlier, the top five insurance market players in Qatar offering life and non-life insurance include Qatar Insurance Company with more than 50 percent market share, and Qatar Islamic Insurance Company Qatar General Insurance and Reinsurance Company, Doha Insurance Company, and Al Khaleej Takaful Group accounting for less than 50 percent market share (The World Portfolio, 2015 and Oxford Business Group, 2015).
The said companies are highly profitable due to its vast offering of non-life insurance products that accounted for the largest value of the insurance sector. The government allows joint stock company ownership/legal form only.
The life insurance sector has similar government laws and regulations as stated in the Insurance Industry in Qatar section of this paper. Recently, the government had mandatory provision for the health insurance of the employees and the Takaful packages that benefited the life insurance sector.
John Pratap (2013) stated in his article in Gulf Times that the life insurance accounted for less than 5 percent of Qatar’s insurance value of USD 1.3 billion in 2012 which can be attributed to high social spending and cultural beliefs influence. The BMI Research (2015) stated that the life insurance sector registers a slow growth. Nevertheless, the growing population and the compulsory policies are expected to benefit the subsector.
There are limited information about the business policies of the private insurers. Nevertheless, such policies are mainly based on the government regulations which were stated earlier. The restrictions of the Qatar law about the operation of the insurance companies made competition among the local players of life insurers and other forms of insurers less stiff.
Facts and Tables
Market Players
Opportunities
The life insurance industry in Qatar, albeit in small percentage value of the total industry, can be developed by offering excellent and innovative life insurance products that will exceed the social benefits that the government currently provides to its citizens. The US Social Security Administration Office of Retirement and Disability Policy US Social Security Administration Office of Retirement and Disability Policy (2015) revealed that currently, the Qatar government provides the social benefits for employees excluding self-employed persons; and household, family, foreign workers, and implements special system for military personnel. The social benefits include the following: old age pension and settlement, disability pension and settlement, and survivor pension and settlement.
Such means that life insurers can have growth opportunities among the segments of self-employed persons, household, family, foreign workers, and military personnel. Further innovating insurance products that would surpass the benefits provided by the government will effectively change the insurance business landscape in Qatar. Product innovation and education or increase awareness of the said products are the keys to higher penetration of life insurance in Qatar which has great future potential given the rising population in the country.
There seems to be lack of awareness that the government social benefits are limited compared to what private life insurers can provide as the government provides only 5 percent to 75 percent range of the gross earnings to the beneficiaries depending on the type of benefits. The lack of competition from foreign providers should not hamper the development and innovation of life insurance products that can serve the Qatar citizens for various life purposes such as retirement, estate protection, wealth building, education, and the likes.
The key players should take advantage of the low penetration of life insurance of Qatar by providing innovative products and solutions and educating the mass citizens about its benefits and advantages to have ample or more than sufficient coverage as the government social benefits seems to be limited. The key players need to educate the mass consumers about the sufficient amount of coverage and needed funds in the future.
Currently, the available life insurances in Qatar are term insurance, health insurance, pure term plans, whole life unit liked plans, and critical illness (Doha Bank, 2015). A suggested insurance plan that can be new to Qatar and can potentially provide high returns will be variable life plans as the plan provides coverage, savings, as well as investment options.
Benefits
The market players should communicate the benefits of the life insurance business to the customers, society, and nation. The life insurance benefits the customers as it helps them become financially secure during their old age, time of loss especially of the loss of breadwinner, help secure completion of children’s education, help build wealth, and protection of the family from high estate taxation during the transfer of inheritance.
The life insurance business benefits the society as it helps provide peace of mind and social order as it provides economic securities to individuals and families. It also help citizens obtain higher degree of education which contributes to social order and economic prosperity of a community, locale, provinces, and nation. The local governments also reduces the risks of having out-of-funds if the life insurance has high penetration as the citizens have low risks of being in poverty level in time of loss of the breadwinners.
The life insurance business benefits the nations as it helps the country accumulate large amount of consumer savings and investments which positively impacts the national economy. It also reduces the risks of having depleting national funds due to high social benefits and services needed to be provided to its citizens if the constituents have ample coverage, protection, disability, and retirement funds.
The life insurance business will also help the country secure more funds for the government’s other services once there is high penetration of it as it helps reduce social benefits expenditures or save from it. As a result, the nation and the government will have more funds for reinvestment in the underserved sectors.
Future Challenges
The cultural beliefs that hamper the growth of the business may continue to be a deterrent in the higher penetration of life insurance in Qatar. The high focus of the key insurers to the non-life business particularly due to the several construction and engineering projects in various industries including energy, oil mining, aviation, property/real estate etc. will make innovation in the life insurance less priority than the booming non-life insurance sectors as these are perceived to be high in monetary value.
The ongoing political turmoil and civil and international wars in the middle east which may affect Qatar in the future may lead the life insurers less motivated in innovation and less aggressive in sales due to the possible losses that may be incurred if the wars and political turmoil in some parts of the Middle East become grave to the point of affecting other peaceful nations in the region such as Qatar.
Suggestions for further growth of life insurance business
Aside from product innovation and mass education of the benefits, kinds, and ample coverage of life insurance, the industry can obtain higher growth by being updated on the databases on population growth, number of uninsured households and their locations, number of self-employed persons, and military personnel and design insurance products appropriate to the said market segments.
The life insurance market players should create advertising and educational campaigns that will counter the current cultural belief that prevents purchases of life insurance. The risk of political turmoil in relation to life insurance business can be addressed through cooperation in the peaceful international relations programs as well as involving life insurance companies in the reinsurance to manage risks.
The life insurance industry in the rest of the world has been high contributor of the insurance sales and growth. It is about time that Qatar should recognize the life insurance in the consumers, society, and the nation as part of the modern world. The Qatar government and the private life insurers should work hand-in-hand to aggressively promote life insurance to the citizens for the benefit of the families, societies, and the national economy. The mutual cooperation between the private and government sector in the propagation of life insurance will easily make consumers avail of such products and related life insurance services.
References
Majid, J. 2015. Qatar Insurance Sector overview. Clyde and Co. Retrieved from http://www.clydeco.com/insight/updates/view/qatar-insurance-sector-overview
Organisation for Economic Co-operation and Development (OECD). 2014. Global Insurance Market Trends 2014. Retrieved from http://www.oecd.org/daf/fin/insurance/Global-Insurance-Market-Trends-2014.pdf
The World Portfolio. 2015. Qatar insurance industry to enjoy CAGR of 6.7% through 2017. Retrieved from http://www.theworldfolio.com/news/qatar-insurance-industry-to-enjoy-cagr-of-67-through-2017/3551/
Pratap, John. 2013. Qatar insurance industry valued at $1.3bn in 2012, says report. Gulf Times. Retrieved from http://www.gulf-times.com/story/358131/Qatar-insurance-industry-valued-at-1-3bn-in-2012-s
Oxford Business Group. 2015. Qatar's insurance sector building on solid fundamentals. Retrieved from http://www.oxfordbusinessgroup.com/overview/qatars-insurance-sector-building-solid-fundamentals
US Social Security Administration Office of Retirement and Disability Policy. 2015. Qatar. Retrieved from https://www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/qatar.html
Doha Bank. 2015. Life Insurance Plans. Retrieved from http://www.dohabank.com.qa/1/db2/en/Personal/Insurance/LifeInsurancePlans.aspx
BMI Research. 2015. Qatar Insurance Report. Retrieved from http://store.bmiresearch.com/qatar-insurance-report.html
