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MENA: the new InsurTech hub?

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In Europe and the states, InsurTech is booming and the second waves of new InsurTechs is reaping positive rewards. But are some regions with high potential, like MENA, forgotten goldmines? Nameer Khan, InsurTech and FinTech thought leader and transformation consultant deep dives into the challenges and opportunities for those willing to lean in. 

The world is evolving at a far more rapid pace than we would have ever imagined, and still the question remains: what is driving this entire movement and change?

The end customer, as their demand for elevated experiences and relevance is ever increasing and headed towards hyper personalisation? New age technological solutions and the changing regulatory landscape as regulators are adapting and embracing to the new developments?

Old insurance business models may have been successful 24 months back, but won't necessary succeed today. There has been a rise of InsurTechs who are now owning the customer relationships, eliminating redundancies and making insurance relevant for the user. To stay competitive, forward thinking insurers have already started taking steps to elevate their technological development.

The past six months have been quite interesting for InsurTech, and many companies and professionals have raised the InsurTech flag advocating innovation and technology. But with my engagements on a granular level there is a lot more talk about InsurTech and less ‘walking the talk’ in forums and conferences, which really kills the true essence of InsurTech. Insurers are still very conservative and seek proof before hopes.

We recognise that most insurers remain focused on two prime goals: growing top line and an improving bottom line. But to achieve this there a plethora of challenges, some of which are controllable and some are non-controllable. Therefore it is critical for any insurer or InsurTech is to know where the future is headed, how the customers are changing now and what may be expected by the customer in the coming years. What are we trying to achieve and how can we achieve it? What strategy do we need to have in place and what operational efficiencies do we need to build that will enable us to scale and set them apart in the market?

MENA Goldmine

MENA is one of the more attractive regions for InsurTech; ripe for growth and already leading the digital adoption rates globally with cross border data flow that has increased 150x.  Add to this, the entire region and their governments are strong advocates of the digitization of their markets. What is driving this?

  1. A population of 350 million
  2. Average age of the region is 26
  3. Some countries have at least 90% smartphone penetration
  4. 70% social-media adoption
  5. More than 310 million daily youtube video views
  6. Fastest-growing consumer of videos on Facebook
  7. Projected to have the highest cloud traffic growth rate at 41 percent
  8. It is projected that by 2020, around 2 zettabytes of data will be produced in the Middle East

Insurance market snapshot

Given the above stats and with 192 insurers in the region, with an average insurance customer age standing at 45 (and the average age regional at 26) it is surprising that insurance penetration stands at a dismal 0.76%. To compliment this, a recent report by Swiss Re’s sigma research unit found that emerging market P&C premiums rose 9.6 percent in 2016, and this will likely continue. Many are spotting the major opportunity in front of them.

MENA is an increasingly crowded and commoditized market with severely low customer loyalty. Insurers that differentiate their value beyond price to maintain or raise customer satisfaction will be leading the race and can tap into the goldmine.

To accelerate growth, insurers should consider simplifying their products and streamlining their application process to make policies easier to understand, underwrite, and purchase.

As digital capabilities infiltrate nearly every industry, there appears to be a big opportunity for the regional insurance industry to transform their business models based on the learnings of other regions. In fact, unless the industry commits to integrating transformative technologies more rapidly into their operations, the insurance companies could risk not only continued stagnation, but potential leakage to InsurTech innovators as well.

However, this cannot happen by simply copying the models or actions being taken in developed markets where InsurTech activities have really managed to make a mark. Apart from regulations and policies -   MENA is a whole new level when it comes to user psychographics, culture within cultures, acceptance of insurance and evolving customer demands. Therefore, deep market insight is a core requirement for success in the region.

MENA leading the race in FinTech Adoption

MENA has really come out strong with amazing initiatives promoting FinTech, and now favoring InsurTech too. The current MENA FinTech Market is estimated to be at $2 billion with an expected growth of $125 million by 2022. Some of the initiatives and new InsurTech's include:

  • Dubai International Financial Centre Authority launched FinTech Hive, regions first FinTech Accelerator in partnership with Accenture. Plus a $100 Million fund for FinTech development
  • Abu Dhabi Global Market launched ADGM REG LAB, the regions first Reglab Sandbox
  • Bahrain FinTech Bay, launched a leading FinTech Hub for co-working and incubation, combined with Bahrain’s regulatory sandbox
  • Launch of MENA FinTech Association, a not for profit to bring the regional FinTech Ecosystem together and be the voice of the community acting as a gateway to global markets.
  • Democrance - UAE- based start-up that leverages technology to make insurance accessible and affordable for the low-income population
  • Aqeed, Dubai-based InsurTech start-up that allows you to compare, buy and manager insurance products in the UAE, recently raised $18 million in series A funding
  • Souq Al Mal - price comparison website has raised $10 million in Series B funding

Way forward

To accelerate growth, insurers should consider simplifying their products and streamlining their application process to make policies easier to understand, underwrite, and purchase.

Insurers can take advantage of growth opportunities, operational improvement, and expense reduction in 2018 if they can overcome a host of internal and external obstacles standing in their way. The following are 5 options (among many) they could consider to potentially improve their top and bottom lines, as well as stay ahead of the competition in the year ahead:

  1. Embed digital technology across their organisations—as part of an offensive strategy to expand their market share and as a defensive measure to fend off potential competition from nontraditional InsurTech companies.
  2. Experiment with connectivity and advanced analytics to narrow the life  insurance application process from weeks to minutes, lowering onboarding costs, and minimising the consumer dropout rate. 
  3. Digitalise underwriting to enable online distribution capabilities, allowing insurers to cast their nets wider and embrace younger demographics that often prefer a more virtual experience. Underwriting digitalisation also could remove a barrier to purchase with those of all ages discouraged by the long and complicated life insurance application process.
  4. Team up with, invest in, and/or purchase InsurTechs,  not just to expand digital capabilities, but to inject a more innovative element into company culture, and to accelerate the disruption of more time-consuming and expensive standard business 
  5. Connect with clients via sensor devices. With this insurers can build more regular and meaningful client engagement and can harness data from devices that monitor vital signs, activity, nutrient consumption, and sleep patterns for more precise underwriting and pricing, while offering value-added fitness and lifestyle.

InsurTech Rising Europe

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