How did you react to the COVID-19 pandemic as an organization, and what impact did it have on your strategy?
As an organization, we adopted a swift and proactive COVID-19 response. Intuitively, we prioritized the safety of employees and customers and replaced the bulk of person-to-person interaction with full automation. We also instructed our surveyors to abide by all safety precautions during on-site operations. During the lockdowns we shut down our 40 branches and migrated 95% of our services to our digital platforms, Najm App and Najm Website, which witnessed a total of around 425k downloads between January and September 2020 and processed over 2.2 million transactions during the same period. Additionally, our 24/7 call center receives over 3 million calls a year. Concurrently, our digitalized operations resulted in higher efficiency in service delivery. This was visible through accident reporting which was 25 percent faster through the Najm App than the traditional call center. Najm cooperated with the Saudi Authority for Accredited Valuers (TAQEEM) to activate electronic damage assessment on-site for minor accidents. Najm also supported the government's COVID-19 response, along with 27 other insurance companies, through collectively donating 67.7 million Riyals. The insurance companies also enforced automatic 2-month extensions for 4.8 million policies to support the community as part of an initiative carried out in cooperation with other stakeholders. Besides safety, it was necessary to consider sustainability and quality of operations. Thankfully, we successfully balanced these elements as we pursued our office and field operations along with fulfilling our mission of being the hub of digitalization in the Saudi insurance sector. This has been a breakthrough that endorsed our strategy and helped us assert our position at the core of the Saudi insurance sector.
What services has your new data center allowed you to provide?
The need for higher digitalization is growing and the forward-looking digitalization initiatives that are being carried out across the Kingdom within Saudi Vision 2030 are being accelerated. In this aspect, Najm has utilized its well-invested digital infrastructure to overhaul motor insurance operations, offering reliable support to individual and corporate users. Today, Najm acts as a repository that stores operations data and makes it available through user-friendly platforms, enabling better communication among all partners to attain common industry goals. Insurance claims, damage claims, and reviewing procedures can all be uploaded via Najm Net. Insurance companies can submit insurance policy data upload requests through the platform. This way Najm contributes to upgrading the digital capabilities of insurance companies by integrating them with its own electronic ecosystem. Najm also carries the Comprehensive Auto Insurance Management Solution (CAMS) through which it collects, records, and exchanges data among insurers. The solution has contributed to developing the capabilities of insurance companies, improving service quality, and detecting fraud.
You recently changed your business model and some of the ways that the organization functions. How and why has this happened?
Najm's integrated strategy, BASE, focuses on creating a balance between “fixing the basics" and being proactive as we seek to grow our brand through delivering world-class customer-centric operations seeking higher customer satisfaction. Our goal is to support the insurance industry and Saudi Vision 2030, working closely with all stakeholders to optimize the insurance ecosystem and enhance its profitability, and facilitate customers' lives. To do that, we focus on digital innovation as a main enabler of powerful data management through an integrated automation plan featuring Artificial Intelligence technology which we have pursued since the beginning of 2019. Najm invested SAR46 million throughout 2019 and 2020 to prepare its technology infrastructures to support more advanced digital services including utilizing cloud services through the cloud data center, in addition to employing IOT and analytics. This is in addition to the recently certified Tier 3 data center where Najm stores the data of the Saudi motor insurance ecosystem. Concurrently, new highly-digitalized fraud detection systems have been adopted. Seeking an enhanced customer experience, we launched BASE with aims to modernize and improve Najm's business process. This new approach utilizes digital technologies and customer experience metrics to streamline operations and measure their impact in line with best global practices. Currently, we are applying the Net Promoter Score system, one of the most reliable metrics used to understand customer loyalty and satisfaction. In parallel, and since July 2020, Najm has adopted a new business model with a redesigned revenue structure that has aligned its goals with Saudi Vision 2030 to increase the GDP contribution of motor insurance, while increasing the number of insured vehicles. The new pricing structure has shifted the main revenue component, Liability Determination, from a per-accident fee to a per-policy fee. This has led Najm to become more sales driven and customer centric, motivating it to increase operational cost efficiencies while supporting its endeavors to reduce the number of accidents. The amended pricing structure is also intended to provide sufficient revenue for Najm to enable advanced R&D that would benefit insurance awareness and contribute towards safer roads. At the same time, Najm continues to promote traffic safety through Kingdom-wide awareness campaigns, including “Don't Stop Their Life" which won the International Finance Awards and Cosmopolitan the Daily Business Award 'Most Innovative Marketing Campaign in the Insurance Industry'. We also won the 2020 International Business Magazine Awards for Saudi Arabia's Most Innovative Marketing Campaign “Amn Taslam" and for Insurance CEO of the Year, and were honored with the bronze medal at SVUS' 2020 CEO World Awards.
What have you seen in terms of growth of the industry during the pandemic?
From a global perspective, the insurance sector has been among the few industries that have suffered the least impact of the pandemic and that are expected to make a quick recovery. Global insurance premiums are forecasted to grow anywhere between 3 and 5.6% in 2021, with emerging markets in Asia anticipating a 7% growth in life and non-life premiums. For the Saudi insurance sector, 2020 continued the upward trend of the previous years. General sales between January and September 2020 reached SAR30 billion, with profits of SAR1.3 billion, compared to around SAR 600 million for the same period of 2019. This is mainly owing to improved operational efficiency and sector restructuring and has resulted in raising the sector's contribution to non-oil GDP to 2.18% this year, from 2% in 2019. During the beginning of 2020, the motor insurance income was weighed down by the disruption of field operations; however, as lockdown measures eased down, the sector's indicators soon recuperated beyond pre-COVID levels. Motor insurance premiums grew by 8.7% over the first three quarters of the year. This prompted a growth in the share of motor premiums to 21.8% out of the total premiums. While this growth can be attributed to the strides the motor insurance industry has made in terms of service quality and the new facilities offered through digitalization, it is also part of the anticipated trend driven by a number of factors. One of these factors is the increasing insurance penetration which expanded at an annual rate of 12% between 2014 and 2019. With only 25 motor insurers in the Kingdom, a gradually increasing market penetration and a surge in the number of vehicles due to more females owning cars, we are anticipating higher demand on motor insurance over the coming years. Other factors driving demand include regulatory improvements, such as better enforcement of the compulsory vehicle insurance act, and incentive packages provided by insurers, including a 10% discount on compulsory insurance, and 15% on comprehensive insurance regardless of the policyholder's driving history.
What changes in the industry will likely persist beyond the pandemic?
While the most obvious post-pandemic transformation is the augmented role of digitalization, there are also other areas of the Saudi insurance industry, with all its segments, that this pandemic has tapped into, like the importance of updating business models and the need to restructure insurance costs. Insurance companies' collective capital currently stands at SAR12.5 billion. The goal is to raise the sector's collective capital in order to mitigate the private sector risk at this critical stage. Achieving this goal may involve strategic insurance company mergers paired with product diversification, especially in the health and motor segments. Thankfully, our motor insurance industry has already begun its recovery journey, progressing towards an innovative operational ecosystem powered by digitalization and AI technologies. With its strong digital capabilities, Najm is leading this recovery through more service automation and by acting as an integrated data hub for the sector. The pandemic ended up advancing our operations, offering us the opportunity to utilize our digital infrastructure and data systems in a way that offers insurance companies and policyholders a wide range of online services while at the same time facilitating field operations. Through this mandate, Najm is also optimizing the insurance sector's contribution to the goals of Saudi Vision 2030 through ushering in a digitalized framework that would enhance profitability, lower risks, enhance the sector's resilience, and support insurers' readiness to accommodate the foreseen growth.