How is KIF working to raise the bar for the insurance industry in Kuwait?
KIF came about in order to have an organization whereby industry professionals could discuss common issues internally, then present our proposals to government officials to resolve the problems we face. We were given the approval to form our federation about nine years ago, and we are now entering our third term. Most countries in the GCC region have an insurance federation. KIF does not necessarily constitute all the insurance companies in Kuwait, though this is something we want to work on. One of the weaknesses of the Federation is that membership is currently not compulsory, as it is for banks, whereby membership of an industry federation or union is imposed by the Central Bank of Kuwait. We play an advisory role, so we can not impose compulsory changes in operating procedures, which is another current limitation. We have been trying to mediate between insurance companies in order resolve their problems.
What are the main issues facing the insurance industry in Kuwait?
One of the major problems of the industry is the lack of proper regulation. Professionals in the insurance industry work according to their own professional guidelines. When we look to our neighbors, the insurance industry in Saudi Arabia is regulated by the Saudi Arabian Monetary Agency (SAMA), Bahrain is regulated by the Central Bank, and insurance regulation in Egypt is carried out by an independent regulator with full legal control to set and enforce policy. But in Kuwait, Insurance industry regulated through a department in the Ministry of Commerce and this presents obvious administrative challenges. A second problem is that we still operate under an obsolete law enacted in 1961 that only regulates licensing procedures and minimum capital requirements. The insurance industry is self regulated to an extent, but there has been a recent increase in the number of licensed insurance companies, which has changed the playing field in the market. This increase in competition in the absence of a structured regulator has revealed many flaws in the legal structure of the sector. We also face the additional problem of a shortage of well qualified human resources in insurance.
What is your opinion of the future of mandatory insurance in Kuwait?
Insurance products are need-based, so interest in insurance policies generally does not exist where there is not a perceived need. Our government protects housing, education, and health for the entirety of Kuwaiti citizens' lives, which makes selling life insurance policies difficult in Kuwait. People here tend not to buy life insurance because there is not a perceived need for it, though companies still try. Kuwaiti citizens are also reluctant to purchase pensions because they already have such sophisticated pension plans provided by the government. The government recently tendered a $328 million retirement insurance program that will cover over 100,000 retirees in Kuwait. This will greatly increase the volume of premiums in the market. The government has already signaled that there would be more similar initiatives in the future if this project is successful.
In what specific ways is KIF trying to influence government policy?
We drafted and presented a law to the government proposing that there be an independent supervisory regulator of the insurance industry in Kuwait, as is the case in other GCC countries. If our proposal is accepted, this regulatory body would be run by professionals who can regulate the market in a proper manner. With more players entering the insurance sector, we need to ensure that they operate in a more efficient and professional way. Legislation is an important instrument of change, and has recently started to recognize the value of the insurance sector, albeit tentatively. The government has started imposing professional liability requirements on certain professions before licensing them. We hope that this generalizing of insurance stipulations continues.
What are your expectations for 2016?
We are big believers in the value of investing in training. We train a lot through KIF and we also sponsor and subsidize additional training. Our focus in 2016 will be on training and education. If our proposed industry legislation is passed, a majority of the current problems will be resolved. If a new independent regulatory body can formally address questions of capital adequacy, reserve and rating requirements, the bar will be raised significantly in a newly reshaped insurance industry.