Fierce competition in the motor and medical insurance segments has led to a drastic reduction in premium rates, and according to industry sources, most firms will post losses on motor insurance in the current year.
Sources told Emirates Business that some insurance companies had even returned the premium collected from policyholders of motor insurance and cancelled the deal.
"The motor insurance premium has fallen by 30 to 40 per cent on an average last year. I don't know how companies can think of making profit from the motor portfolio," said Omer Elamin, Senior Managing Director, Arab Orient Insurance Company. Though many have downsized their motor portfolio, Elamin said companies cannot do away with 'motor' as it generates a decent cash flow.
Analysts said cash flow is important for insurance companies, especially those that depend on investment income. More than that, no company wants to allow their market share to fall. With the advent of more Takaful companies in the market, competition among the insurance firms has increased, prompting them to undercut on their premiums.
With most companies resorting to reinsuring most of their risks with regional and global firms, they stand to receive hefty premiums from them. Elamin said the commission income could range from 30 to 40 per cent.
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