Eastern promise

Eastern promise
Eastern promise

Mandy Langfield looks at the travel insurance market in the Middle East  

The travel insurance market in the Middle East is on a steady growth path. Mandy Langfield looks at how insurers are making inroads in the region

The United Nations World Tourism Organisation (UNWTO) said in February 2015 that ‘the tourism sector in the Middle East and North Africa (MENA) has been able, by and large, to adapt and recover in recent times, and even bounce back over the past year’ following a period of political instability in several countries in the region. The UNWTO further predicted that outbound travel would continue to grow in MENA countries, and that by 2030 the region would have a total of 81 million outbound travellers. Market trends identified by the European Travel Commission (ETC) Digital Portal show that Middle Eastern travellers tend to spend a significant amount of money when they travel, they prefer to travel in large groups, and they stay abroad for longer than the average tourist. In 2014, one in six of these travellers booked their trip online – showing the potential for offering travel insurance as part of such online purchases – and these travellers are younger than in other markets, with many being under the age of 25. The ETC report stated: “In the last couple of years, the Middle East has really developed into a region that stands for tourism growth. Travellers in the Middle East have high expectations when it comes to digital technologies, and are willing to spend a lot of money for their holidays. The region is most certainly one to watch, in terms of both its attractive tourism destinations, and its growing number of tech-savvy outbound travellers.”

Middle Eastern travellers tend to spend a significant amount of money when they travel

Kumud Sengupta, founder and director of Dubai-based Market Vision Research & Consulting, was very clear in her advice to insurers – or any other company for that matter – seeking to improve their standing in the Middle East market: “My advice to all those who are targeting the Middle East markets: get on with e-technology!”

Distribution networks

Current distribution channels certainly reflect that push on technology, with major local airlines offering travel insurance to their customers when they buy tickets online. AIG, for example, offers travel insurance through several airlines including Emirates, and Etihad via its Travel Guard brand; Air Arabia offers Tune Protect travel insurance to its customers, and Gulf Air offers travel insurance from Mondial Assistance (Allianz).

Finaccord, a global research consultancy, found in its investigation into travel insurance and assistance in the Middle East that the use of the Internet to make travel bookings is increasing in the region, although the number of companies offering travel insurance via their website remains limited. David Bowles of the company said: “These websites include local variants of multinational entities as well as popular local providers, which are often the most widely used sites. This distribution channel offers significant scope for growth: when Finaccord conducted its research, fewer than a quarter of the online travel specialists surveyed offered stand-alone travel insurance and assistance.”

Insurers need to be aware that the popularity of booking trips via travel agents continues in Middle Eastern regions, and working with travel trade partners should not be underestimated. According to Bowles: “The core travel agent and tour operator category still represents a very important segment of the travel trade for providers of travel insurance and assistance. In the Middle East, the majority of travel bookings are still made via these entities (often in person), and there are manifold advantages to distributing single-trip travel insurance policies alongside the underlying travel products themselves.” Finaccord’s most recent survey in the region found that two-thirds of travel agents and tour operators provided stand-alone travel cover to their customers.

It should be noted that the scale of travel insurance provision in the Middle East market varies across the region, with the proportion of policies sold via travel agents being notably lower in Saudi Arabia and Kuwait. In the UAE, meanwhile, 100 per cent of travel trade entities surveyed offered travel cover, as did the same number in Qatar. An impressive 87 per cent of travel entities surveyed in Oman offered their customers travel insurance as well.

The global rise of bancassurance, including travel insurance as part of a packaged bank account, has yet to really make its mark on the travel insurance market in the Middle East

Many Middle Eastern travellers, when they go abroad, travel to nearby countries by coach, and as far as Finaccord’s research could discern, not one of the coach service operators is currently selling travel insurance to its passengers. “Given the significance of road travel within the region, this might at first appear to be a missed opportunity,” noted Bowles of Finaccord, “However, at present, travel insurance uptake among Middle Eastern residents travelling to neighbouring countries tends to be very low.”

The global rise of bancassurance, including travel insurance as part of a packaged bank account, has yet to really make its mark on the travel insurance market in the Middle East either, with fewer than 20 per cent of banks surveyed by Finaccord offering travel insurance and assistance services. Packaging such services with credit cards is, however, becoming more frequent, with 40 per cent of credit cards including comprehensive travel insurance, although this again varied widely across Middle Eastern countries.

Market challenges

Key players in the Middle Eastern travel insurance market are AXA Gulf, Chartis (AIG) and Allianz (through Mondial Assistance), as well as Zurich and ACE. David Fedarb, head of travel insurance in Eurasia and Africa for ACE Group, noted that there is an ongoing challenge in the region concerning the general lack of familiarity with insurance and assistance benefits, but also said that there needs to be recognition of the fact that employees face exposure to many insurable events while travelling in the MENA region. He said: “As with all forms of insurance, it takes time for a groundswell of acceptance and understanding to occur, but the signs are that in the Middle East, the benefits of travel insurance are increasingly understood.”

For AIG, the main barriers to the market include a lack of continuous communication with consumers. Evren Sandıkçı, interim communications lead, Middle East & North Africa, AIG, told ITIJ that media coverage of the importance of travel insurance is very important: “If types of accidents and claims are shared on media [platforms], making good use of testimonials, then customers will naturally understand the benefits of the product.”

Zahir Sharif, general manager in the UAE for Zurich Insurance Middle East, also identified consumer awareness, understanding and penetration of travel insurance as the main barriers to the industry’s success, with the company’s research showing that just 10 per cent of UAE residents take out travel cover. Sharif added: “There is also confusion over what cover credit cards, home insurance and health insurance provide when travelling overseas.” Distribution was further highlighted as a major concern by Zurich: “In the region, travel insurance is generally distributed through intermediaries; mostly insurance brokers and travel agents. Unfortunately, travel insurance is viewed as a non-core product. Brokers would rather sell higher ticket insurance products, such as motor insurance, while travel agents are more likely to cross-sell car rental or hotel accommodation when dealing with customers.”

Raising awareness, then, is key for providers to unlock the potential of the Middle Eastern travel insurance marketplace; so what’s the plan for the future? Zahir Sharif of Zurich has a few ideas: “Brokers, travel agents, insurers, airlines, hotels and embassies should all take responsibility for educating travellers about the need for insurance. Embassies could go a step further and make travel insurance mandatory for all visa applications. For example, if you want to apply for a Schengen visa in Europe you require proof of having travel insurance – this could be extended to other countries.” He added: “Insurers could look at including travel cover with other insurance products, such as home insurance. Alternatively, other covers, such as temporary home insurance while overseas, could be embedded into travel insurance to make it more attractive.”

There is ... confusion over what cover credit cards, home insurance and health insurance provide when travelling overseas

Evren Sandıkçı of AIG further stressed the importance of consumer engagement: “Systematic communication of benefits, sound communication of pricing, continuous communication, accessibility, quality claims services, education of the sales staff and a relevant sales channel mix should all increase awareness and uptake of travel insurance.” He also advocated the use of social media and digital communication platforms, something in which the global insurance industry has been relatively slow to invest.

Policy details

Having established that insurers face something of an uphill struggle when it comes to encouraging people to take out travel insurance, we must examine where the industry is seeing successes, in terms of the types of policies that are being sold. Finaccord’s research shows that single-trip policies are more popular with customers than annual multi-trip products, with the company suggesting that most of the 16 per cent of travellers taking out annual cover are business travellers. Bowles noted: “The number of annual policies has seen a steady increase from an estimated 14.4 per cent in 2008, and this is likely to have an impact on distribution channels: whereas travel agents and tour operators are best-placed to sell single-trip insurance at the point of sale, the distribution of annual policies instead favour direct sales by insurers, along with distribution by banks, brokers and aggregators.”

Stephane Baj, regional director, accident and health, corporate and affinity, EMEA for ACE Group, confirmed that business travellers are changing their habits: “Business travel in the Middle East has traditionally tended to involve purchasing travel insurance on a trip-by-trip basis, rather than an annual policy which is normal practice for most US and European companies. We expect awareness of the benefits of a more structured approach to grow, in line with an increase in people travelling more for both business and leisure purposes, as economic reform gathers pace and attracts higher levels of foreign investment, at the same time as companies based within the region continue to globalise themselves.”

Future finances

According to David Fedarb of ACE, much work remains to be done in terms of education of the travelling public, as well as distributors such as airlines and brokers. Stephane Baj also emphasised the importance of brokers to the market: “Brokers are the industry’s front line sales team, and as such they have a vital role in demonstrating to potential insureds the benefits of travel insurance, and explaining its place within a wider group personal accident insurance programme.”

Pointing out that travel to European nations requires proof of insurance before a visa will be granted, Fedarb says that such measures do improve awareness of travel cover, but that 'the industry needs to do more to demonstrate the cost and service benefits of being protected and having access to travel and medical assistance every time a person travels'. "To do this," he said, "we need to invest our time and work on improving dialogue within the travel industry itself, as well as with consumers.”

travel to European nations requires proof of insurance before a visa will be granted

Bowles concluded: “We anticipate significant growth in travel insurance and assistance policies in the Middle East. In its most recent report on the region, Finaccord predicted that gross written premiums would rise by 12.2 per cent per year in real terms, from US$95.7 million in 2012 to $183.2 million in 2016.” Saudi Arabia currently has the most developed travel insurance market, with further growth forecast, while the markets in Bahrain and Qatar were highlighted for their potential and recent steady growth.

Certainly, the potential for travel insurers to increase the take-up rate of travel insurance among Middle Eastern travellers is there for the taking, but only if the companies invest in communicating the benefits of cover not just to travellers, but also in exploiting the power of digital media to enhance awareness within the travel trade itself.