What are the main opportunities for growth in the sector?
RAYMOND CHAM The insurance sector is suffering from adverse macroeconomic conditions. While the sector was growing by 7-8% about 10 years ago, the current market is struggling to achieve growth higher than 3%. Bankers' performance is in line with the broader market growth, although in some years over performing it by 1% or 2%. In order to achieve renewed significant market growth, Lebanon is in need of a drastic change in the economic environment, which can come mainly from foreign capital inflows. At the moment, CEDRE investments represent the most important concrete opportunity for the growth of the economy and, subsequently, of the insurance sector. Some of the projects which are in the pipeline (e.g. electricity sector reform, water waste, waste management), while not productive in terms of business, will generate employment and increase the need for insurance coverage. Another opportunity, although farther on the horizon, is the reconstruction of post-war Syria. Through the affiliation of our mother company Nasco Group, which comprises lines for reinsurance broking and direct broking, as well services and claims management, we are well placed and supported. We can take advantage of any of these potential opportunities.
JOSEPH NASNAS There are huge opportunities for growth in all segments, from sectors that lack coverage (e.g. SMEs, fire, house) to upcoming economic opportunities (e.g. oil and gas). For example, only a limited percentage of Lebanese houses are insured. The same goes for SMEs. About 44% of the Lebanese population does not have any kind of health coverage. Thus, there is room for growth. Another opportunity is digital innovation, which is something we have been tackling for 10 years with AXA Group. The benefit of being a multinational group is being able to identify trends before they arrive in emerging countries. Digitization will inevitably touch the new generation, affecting different facets of the insurance field, from services and customer care to policy renewal and claim procedures, payments, and so on. At AXA, we have been preparing for the advent of digitalization and adapting to the requirements of new generations. From the perspective of insurance lines, digitalization will affect retail insurance much more than large commercial lines.
What improvements in the sector would you like to see?
RC While opportunities for growth are there, the insurance sector must be internally prepared to accommodate the sector's growth. In the last years, the Insurance Control Commission (ICC) has been implementing several regulations to keep the insurance industry at the level of international standards. However, this will not prevent the need to reform the obsolete legislation of the sector (dating back to 1968 and amended in 1999), reduce the number of insurance companies through merger and acquisitions, and strengthen them by moving into a risk-based capital approach and imposing a full-fledged governance structure. Moreover, the sector needs a commitment from the government's side to promote or at least not discourage savings plans and retirement schemes. The absence of tax incentives also hinders the growth of the life insurance segment. Although the Association of Lebanese Insurance Companies (ACAL) has long advocated for incentives for retirement schemes, the current trend seems to be for increased taxation in general, according to the recently advanced budget reform. Even if this will enable the government to reduce the budget deficit, this move risks stalling the growth of the broader economy and the insurance sector.
JN Through AXA, we are developing a new concept called “Payer-to-Partner." The idea behind this is to partner with our customers to empower them to live better lives and provide them with a preemptive service. The insurance sector of the future will not be about fulfilling claims, but rather providing customers with the service that benefits them the most. This means helping our customers not need us and have a better life because of that. We are also active on the education and health fronts and working on wellness products for medical insurance and facilitating access to health care. We are also developing specific programs for diabetic people to help them manage their disease. This will be a win-win situation for all parties involved. The increasingly expensive nature of premiums is threatening the profitability of insurance companies, so this strategy allows us to address this problem and increase the wellbeing of our customers. Instead, with regard to motor insurance, we have partnered with a foundation to enable our customers, young drivers, to take defensive driving lessons free of charge.