Premiums in the life insurance segment increased by 158 per cent to Dh1.651 billion in 2006 from Dh639 million in 2001, according to data released on Sunday.
The share of life insurance compared to non-life insurance in the UAE’s total insurance premium segment is a meagre 16 per cent due to high costs, Dubai Chamber’s said in an economic bulletin titled 'Challenges Facing the UAE Insurance Sector'.
However, investments in the UAE insurance sector decreased by 5.6 per cent to Dh17.27bn in 2006 from Dh18.27bn in 2005. The decrease can be attributed to fall of the sector’s investments in the stock market, which experienced a decrease of 18 per cent from Dh11.97bn in 2005 to Dh9.87bn in 2006.
Within the non-life insurance activity, premiums increased by 30 per cent from Dh6.65bn in 2005 to Dh8.66bn in 2006. In 2006, Dubai accounted for 48 per cent in UAE’s total insurance premium followed by Abu Dhabi at 35 per cent. Collectively, the two emirates accounted for 83 per cent of the country’s total insurance premiums.
Although it is expected that the insurance sector will continue to grow at an accelerated pace due to the increasing population in the country, some setbacks within the sector require some immediate attention.
In view of the government’s ambitious strategy to develop and improve the healthcare sector, through the introduction of a comprehensive health insurance programme, the question motioned is whether the current insurance sector can accommodate the health insurance challenge, the report questioned.
Another concern is the lack of widely practiced insurance activities such as business interruption, crime, term life, trip cancellation, medical evacuation, multi-trip, quote and purchase, whole life and universal life in the UAE.
The implementation of such activities can be brought about by vertical integration and strategic alliances thereby increasing the growth potential of the sector.
The insurance sector plays a crucial role in the growth of any economy and it is considered to be the most important financial instrument used to cover the risks that arise in society.
The UAE insurance sector (insurance companies and agents) was established in accordance with the Federal Law (9) of 1984 following a ministerial resolution and executive regulation. Besides, the Insurance Regulatory Authority was set-up in 2007 following Federal Law (6) to assist with the efficiency and development of the sector.
In 2006, there were 48 insurance companies, of which 24 were insurance companies incorporated in the UAE and the remaining were foreign insurance companies. Thirteen companies were carrying out both life and non-life insurance activities, of which 11 were national and two were foreign.
Thirty-one companies were carrying out non-life insurance activities, of which 13 were national and 18 were foreign. On the other hand, Four foreign companies were carrying out only life insurance activities.
Life insurance premiums are up by 158%