Outlook and potentials in the Lebanese insurance sector

The view from the ICC

Reading Time: 3 minutes

Regional geopolitical turmoil and ensuing economic uncertainties continue to place increasing pressure on the insurance sector. Stagnation in most of the sectors of the national economy is reflected in slower growth in premiums written by Lebanese insurers, and higher strain on profit margins.

In light of this, the Insurance Control Commission (ICC), which is the regulatory authority for the supervision and control of the insurance sector, reporting to the Ministry of Economy and Trade, forecasts growth rates in 2018 of -7 percent for life insurance, driven by lower new business and little activity on mortgage and personal loans: -4 percent for motor insurance also driven by lower new business; and -1.7 percent for property and casualty insurance. The stagnation in property and casualty lines is directly correlated with the economic situation in the country, which is witnessing little activity in terms of new projects, transportation, and other similar activities.

The downtrend in the above business lines is juxtaposed with an important expected 16.1 percent growth for medical insurance, triggered by an anticipated increase in the number of persons insured following the recent implementation of Decision 186/ICC, pertaining to the guaranteed renewability of medical insurance products.

As such, the expected gross written premiums in 2018 should reach $465 million for life insurance, $365 million for motor, $560 million for medical, and $270 million for the property and casualty lines, for a sector total of around $1.66 billion, a growth of 1.2 percent when compared with 2017.

The mitigation of the challenging economic conditions requires increased focus on innovation in terms of products, services, and operations in the broad sense. Large segments in personal and property lines remain weakly insured, if at all. The sector is yet to show a marked commitment to innovation, despite serious but sparse initiatives.

Digitalization is still largely shy; while it imposes an understandably complex path, it remains a necessity if the sector wants to benefit from the present challenges and prepare for coming growth opportunities. Digitalization needs to be considered at different levels of the insurance operations, starting with distribution and going all the way through to financial reporting. Embarking on this path will undoubtedly foster significant improvements to the core administration systems, enhancing the data quality and enabling advanced pricing and risk management techniques to be deployed.

Good governance and transparency play a major role in this proposed scenario, as they provide the guarantee that an institutionalized and rigorous approach to capacity building and innovation can be deployed. In other circumstances, shareholders would be highly reluctant to provide the support needed to boost innovation through digitalization or other creative ideas.

The ICC is progressively deploying a framework that would help the sector to pursue new avenues. The rollout of this framework started several years ago with enhanced reporting transparency, through annual report statistics, providing stakeholders with an enriched perspective on what is going on with the sector. Risk-based capital would be the next major step, reinforcing the financial condition, and establishing a scientific context within which insurers would have to manage their underwriting, investment, and credit strategies to reach an optimal setup.

In this context, one of the ICC’s focuses is its service tasked with providing Lebanese policyholders with adequate assistance and consultation for complaints related to insurance policies and services. Launched in 2018 under the name “ICC Care,” this service’s uptake by policyholders is already showing the importance of ICC Care’s growing role in the resolution of misunderstandings and complaints. At the time of writing, the ICC is preparing the launch of an extensive awareness campaign related to ICC Care, targeting the insured population holding individual or group medical insurance coverages. This is essentially an extension of the social media efforts that were initiated recently. The latest announcement related to the commencement of Lloyd’s direct activity in Lebanon via cover-holders is reflective of the ICC’s efforts in this perspective.

On a separate note, the ICC is using its website and social media to keep the public informed about the implementation and implications of Decision 186/ICC, which is related to the guaranteed renewability of medical insurance contracts for individuals and groups. For instance, the ICC published a list of insurance products that have received the ICC pre-approval, and introduced a number of infographic slides that summarise the key features of this decision.

As a concluding remark, I would like to restate that the insurance sector in Lebanon has an excellent opportunity to build itself into a natural platform for insurance in the Levant region. This is within our reach, and we all need to strive toward this objective in a disciplined and cooperative way.

Nadine Habbal is the acting head of the Insurance Control Commission of Lebanon.