Insurers’ thankless task

Insurance often does not have the most sterling of reputations as a career or a mindset — even among insurance professionals. When an up-market British insurance broker last February wrote his version of a valentine ­­— or, more precisely, a sales pitch for insuring your diamond rings on the occasion of Valentine’s Day — he opined depressingly that “insurance is to romance what a bucket of water is to fire.”   

When extending the logic of what pillow talk on policies and premiums reserves apparently does to moments of tender romance, it should be incredibly difficult to fall in love    with insurance. 

This fits broadly with the perception at insurance companies, frequently encountered by Executive, that it is hard to motivate today’s high achievers among university graduates in the Middle East to pursue insurance careers. But to get a better grip on the attitudes of insurance managers toward their profession, Executive asked two successful and outspoken insurance chief executives, Fateh Bekdache of Blom Bank-owned insurer Arope, and Farid Chedid of reinsurer Chedid Re, about the thrills they find in their work.  

To tell it straight, both said in independent interviews almost the same things: they feel passionate about insurance, praising the profession for the many ways in which it contributes to the economy. Both highlighted the variety of skills demanded in insurance as reasons for their passion but both also expressed regrets that “there is a misunderstanding in the general public about the insurance sector” (Chedid), and that “it is difficult for insurance people anywhere to have a good reputation” (Bekdache).

Chedid added that as an industry, insurance fails to communicate how vital it is to the economy and create the idea that a career in insurance is as interesting as banking or more so. That appears to be a sentiment felt far beyond offices in Beirut, as global insurance industry apologists project a tremendous need to emphasize the indispensability of insurance.

As an example, a just-published paper by two experts at Zurich Insurance Group opens its discussion of insurance in the Middle East and North Africa (MENA) by asserting that “insurance has the potential to provide vital support to emerging economies. But its advantages often tend to be overlooked.” 

Indeed, and not surprising. But wouldn’t one be rather surprised if a report on banking in the MENA region were to enter the subject matter by promising “to shed light on the positive contributions” of banking, “both economically and to society”?

Here to stay

After 10 years of overall rapid growth, the presence of insurance as an enabling and stabilizing force in Arab economies should no longer be news. In stewarding over a projected $4.7 trillion in global premiums (2012 approximation based on a May publication by reinsurer Munich Re), the economic weight of the insurance industry is beyond question. 

The growth of premiums in the MENA region from $26 billion in 2007 to $42 billion in 2011, as cited by the Qatar Financial Center’s first MENA Insurance Barometer, makes a strong argument for the expanding importance of insurance in Arab lands, even as 44 percent of the cited 2011 numbers are written in two non-Arab countries, Turkey and Iran.   

For people who do not care so much for the pecuniary component, the less obvious and more intriguing aspects of insurance can be its contributions to society, which run deep and wide. 

Just to give two pointers from the United States, the most detailed information on historic buildings that an urban conservationist in the US can find today is priceless fire insurance maps that go back some 150 years. And millions of people aching for social acceptance in the US and Europe have been guided towards excessive dieting cultures because ideal weight charts of limited medical value were compiled in the 1940s by American insurer, Metropolitan Life.

Further still, if you search for the contribution of Versicherung (the German word for insurance) to culture and literature, you get front-page returns on the role that working in a semi-public labor insurance company played in the life of author Franz Kafka, a giant of 20th century writing. 

While Kafka’s experience with his workplace has been portrayed as ambiguous by literary critics, insurance as an economic discipline has proven unambiguously to be cornerstone of the success of a titan in another field, global investments. Berkshire Hathaway, a manufacturing company turned insurance group, is inseparable from the story of self-made mega-investor, Warren Buffet. 

Always a tough sell

With so much historical evidence of economic and social enrichment attributable to insurance, it is perhaps yet the discipline of kitchen psychology that must explain why so many insurance professionals face uphill battles to explain the good of their industry.  

One can surmise, for example, that insurance requires the client’s trust of the provider as a psychological base and precondition for investing money into a policy ­­— but in order to get the client interested in buying a policy, the insurer has to highlight risks from fire to theft and diseases to accidents. 

Views will vary on the possible implications of using clients’ fears to make them buy policies and needing their trust to sell to them, but the fact that insurance is sold, not bought, is one of three problems of the insurance industry, according to Chedid.

Chedid also cited another problem: over-promising. It is an unequivocal detriment to a provider’s credibility if insurance sellers create expectations that every claim will be covered without the least examination or hesitation, he said. “As soon as you start paying without questions, without implementing conditions, everything becomes uninsurable, because costs will escalate tremendously. As an industry, we are here to resolve bad news, and it is unfortunate that the expectations are sometimes different from the reality. The insurance industry is in many instances responsible for this. If you tell your clients ‘I will pay you whatever happens’, you raise expectations to levels you cannot fulfill and this is where the problem lies.”  

The insurers’ third problem is by design; the core function of traditional insurance activity is to swing into financial action when people are confronted with communal or personal disasters. As Bekdache put it, there is always “a bad note” in this interaction. 

In the long-term outlook, however, insurance is set to expand on preventive roles ranging from disaster prevention to health promotion. As it is destined to serve ever more complex needs of societies and safeguard assets all around, risk management is moving insurance forward and away from its primary concentration on financial disaster response. 

Apart from this meta-trend, the economic projections of insurance are providing today’s career seekers with certain hints: Munich Re, the world’s largest reinsurer, said in a study last month that global life insurance markets will grow by almost two thirds in the remainder of the decade and reach 3.1 trillion euros by 2020, and that property and casualty (non-life) markets will have about 50 percent growth from today’s global premiums to 1.85 trillion euros in the same year. The MENA region is not cited as one of the top drivers of this growth, but since insurance expansion is shifting generally into emerging markets, a decade of Arab insurance looks inescapable, in good time.         

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.