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Competition heats up in UAE insurance aggregation market

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Competition heats up in UAE insurance aggregation market

The launch of two new insurance aggregation platforms in the United Arab Emirates highlights the potential for digital sales growth in the largest insurance market in the emerging economies of the Middle East and North Africa.

Gross premium sales of $13.5 billion in 2017 put the UAE ahead of all other Gulf Cooperation Council countries, while the the country also has the highest rate of insurance penetration in emerging markets in the region, according to the Swiss Re Institute.

The market size can be ascribed to the country's large expatriate population, many of whom are accustomed to buying insurance and have disposable income, while the life segment in the UAE is also "very well developed compared with other [regional] markets," said Sanjay Jain, MENA insurance advisory leader at Ernst & Young. Most multinational insurers have their regional headquarters in Dubai, resulting in more marketing, education and sales focus on the UAE market, he said.

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Digital distribution opportunities

Although the UAE is highly digitally connected, with 225 mobile subscriptions per 100 inhabitants, according to October 2017 data from the UAE's Telecommunications Regulatory Authority, few consumers in the country are buying insurance products through aggregators.

Digital distribution can help grow the overall market in the UAE and in other MENA economies, said Jain, though he said the development of insurance regulations and mandatory requirements are the biggest shaper of markets in MENA. "[Aggregators] will create a lot of demand, they will create a lot of awareness," he said

There is no official data, but figures circulated within the industry suggest that just 3% to 5% of all policies are sold through online aggregators, Hadi Radwan, the chief product officer at Aqeed, an insurance technology company, told S&P Global Market Intelligence.

Aggregators themselves are not directly responsible for a policy sale, which is done through a licensed insurance broker. Instead, aggregators typically receive revenue through a lead-based compensation model or a performance-based commission model.

New aggregators enter evolving market

Aqeed launched in May 2018 with $18 million in funding already in place. The market is quickly developing, said Radwan, who estimates that aggregators could seize a 30% market share over the next three to five years.

Jon Richards, CEO of yallacompare FZ-LLC, the largest insurance aggregator in the UAE, said in June 2018 that he expects aggregators will become "the most common sales channel for Middle East insurers by 2022."

Policybazaar UAE is another new player, which launched in September 2018. A subsidiary of Policybazaar, the Indian aggregator behemoth that has received around $350 million of funding since its launch in 2008, it intends to capitalize on brand recognition among the UAE's sizeable Indian resident population, said Neeraj Gupta, Policybazaar UAE's CEO.

Motor insurance is currently by far the most developed product in the UAE, making up around 90% to 95% of total aggregators' insurance sales, which in turn constitutes around 10% to 15% of the total motor market, said Gupta.

By comparison, in some markets in Europe, sales of motor gross written premiums via aggregator platforms were as high as around one half of all direct sales in 2017, with market share of 53% in the U.K. and 48% in Italy, although in the Netherlands that share was just 10%, according to a report by McKinsey & Company published in December 2018.

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The nascent market now has at least five aggregators — Aqeed, Policybazaar UAE, yallacompare, Souqalmal.com LLC FZ and Bayzat LLC, which offers HR software and insurance. Souqalmal and yallacompare also offer a wider set of aggregation services, including for retail banking products, but insurance may be the bigger prize: The study by McKinsey found that revenue from insurance products was the main source of revenue for aggregators in the Netherlands, the U.K., Germany and Spain, ranging from 60% to 80% of their total revenue.

Richards said in last June that yallacompare — which rebranded from compareit4me in 2017 — accounts for three quarters of the UAE's insurance aggregation market, having originated more than $20 million of policies in 2017, making up 50% to 60% of his platform's monthly revenue.

Both yallacompare and Souqalmal have reported strong percentage growth figures for insurance sales, but these figures represent growth off a small base, said EY’s Jain.

Tech takes on traditional channels

Though competition between aggregators is set to intensify, given the nascent state of the market, the greater challenge for digital platforms is still to win customers over from traditional distribution channels.

The limited market share of aggregators also puts them in a weak position in trying to convince larger insurers to come on board. For premium insurers, at present it does not yet make sense to have their products listed alongside lower-cost competitors on an aggregation platform where consumers are primarily price-driven.

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According to a survey of aggregator websites by S&P Global Market Intelligence in late January, Orient Insurance PJSC, Oman Insurance Co. PSC and Abu Dhabi National Insurance Co. PSC, the three largest locally listed insurers by gross written premiums, as well as Axa and RSA Insurance Group PLC, major international brands, were not listed on aggregators including yallacompare, Souqalmal or Aqeed in the motor insurance category. But they were listed on Bayzat, which exclusively aggregates health insurance, offering policies for both businesses and individuals.

Promoting 'cultural shift'

One factor holding back consumer adoption in the UAE is the lack of integration between aggregators and insurance companies, said Gupta. Unlike in India, where buying an insurance policy is "almost like buying an airline ticket," in the UAE customers can select a policy online and pay for it, but will still need to manually enter their information into an insurance company's website, he said.

Radwan said he has seen a more receptive approach from insurers to aggregators recently, with insurers working on APIs to deliver real-time pricing and allowing issuance via the digital platforms, something he expects to be available in three months to six months. "The market is moving in the right direction in terms of technology," he said.

As of Feb. 1, US$1 was equivalent to 3.67 United Arab Emirates dirhams.