Oman Insurance Association (OIA) announced it was developing a blueprint for the industry for the coming two years. Among the initiatives to be pursued in the medium term are better professional training for the workforce, the development of a regulatory framework for credit control, and increasing insurance awareness.
The association also said it plans to work more closely with the sector’s regulator, the Capital Market Authority (CMA), to develop a consultation process with the aim of improving the exchange of information, setting objectives for the industry and implementing reforms.
The OIA’s newly elected chairman, Ali Abduladheem Al Lawati, said, “Better communication between the industry and regulator would bolster the market.” “By strengthening consultation with government and other stakeholders, we aim to improve the quality of execution to benefit consumers, improve consistency and raise standards,” he told the local media in January.
E-insurance to drive automotive segment
Another issue the OIA has vowed to focus on is e-insurance, a system that was launched last year and provides a database shared by the Royal Oman Police (ROP) and insurance providers. Insurers will have access to the traffic history for all vehicle owners, allowing policy writers to set appropriate premiums for drivers. The CMA has said the system will encourage self-regulation and compliance with traffic rules. Automotive insurance is one of the highest profile products on insurers’ shelves, accounting for some 40% of gross written premiums (GWP) and around three quarters of all policies. For Neil Brand, country manager for Oman Insurance Company, the e-insurance initiative backed by the CMA will improve efficiency and act as a public service.
“The e-insurance initiative is a positive development, not just to help standardise the market and to assist risk valuations, but also socially to encourage safer driving,” he told OBG in early February.
Though the OIA hopes to raise awareness of the sector, and thus boost turnover, it may have its work cut out for it. The Sultanate is one of the smaller insurance markets in the region, with GWP of around $750m in 2012, placing it fourth in the GCC, according to a report issued last year by business consultancy Frost & Sullivan. Premiums are also low relative to the size of the economy – the insurance penetration (the ratio of GWP to GDP) stands at less than 1%, well below the global average (7%) and lower than that of the Gulf region (1.2%).
While Oman is a small market, it has a large number of policy writers, with 23 insurers registered, although the top four account for more than 50% of premiums. Over-capacity has kept premium pricing low, especially in auto insurance, and weighed on profits.
Market consolidation is a possibility, particularly if the CMA were to raise minimum capital requirements, which it has said it could do. This would be a positive development, J Retnakumar, CEO of Gargash & Trade Links Insurance Services, told OBG.
“There are still too many players in the Oman insurance sector. Higher minimum capital requirements would force consolidation and raise the capacity of the serious companies,” he said.
Room for improvement
The competitive nature of the market, where premiums have consistently gone down, has not helped in improving the level of services, range of coverage or product innovation, according to Gautam Datta, the CEO of Sharia-compliant underwriter Al Madina Takaful. In a market such as Oman, where penetration rates are low and clients price sensitive, the sector has to be more innovative to build value around insurance products and earn the trust of the consumer, Datta said in an interview with OBG in early February.
“Customers have come to expect low level of service from insurance companies, which is unhealthy because it inhibits growth,” he said. “The industry must push past its comfort level to become more customer-oriented,” he added.
Tuesday, February 18- 2014 @ 11:01 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.