According to Abdulrahman A. Al Sahli, CEO of WAFA Insurance, Saudi Arabia’s insurance market, the second-fastest growing in the Gulf Cooperation Council (GCC), has good potential for further gains due to its low insurance penetration levels.
Saudi insurance sector has witnessed a substantial recovery in 2015. Gross written premiums in the Saudi Arabian insurance industry will grow by 25 % higher this year, compared to 2014, according to Standard & Poor’s (S&P). Profitability returned to the positive zone while capital increased resulting in an increase in the overall solvency of the sector providing Saudi Arabia the opportunity to overtake the UAE as the largest insurance market in the region and drive the growth of the GCC insurance industry between 2015 and 2020. What would you attribute these strong improvements to and how would you evaluate the Competitiveness of Saudi´s insurance sector compared to other countries in the region?
The growth is a fact. If you look back at the last seven or six years, you will surveys showing those positive results the growth on yearly basis is between 20% to 25%. Now, is this growth going to slow down? The growth will continue for the coming five years and at the same rate. The reason for it is that the government is implementing new regulations for commercial insurance, especially in the motor and medical areas, which today represents a high percentage of the overall market. At the same time, people are getting more educated and learning more about the benefits of insurance that will foster the growth as well.
I´ve had been in the insurance industry since 1989. I remember that in the mid 90's only 15% of the population had vehicle insurance. Now things have changed, I'm not talking about the compulsory insurance because of the new regulation, everybody is becoming more concerned about the need of it, the comprehensive insurance ratio is increasing and people buy products to protect their homes and savings. There are still some challenges due to the religion but I believe things have improved and the Government is doing a great job in order to educate Saudis and raise awareness. SAMA is giving clear guidelines, I like that, and I am sure it will improve the performance of the market.
In terms of the main drivers foe our industry I think that motor and medical will still play a big role, but I believe that the real game changer will be savings and protection insurance. In 1998, SAMA had the regulation that no insurance company was allowed to sell saving and protection products to the individuals, banks were the only ones authorized to do it and they did well, frankly speaking.
Offering those services to the customer?
Yes, as an individual you trust your bank when it comes to buy a saving or investment product. There´s a tendency to believe banks are better than insurance companies when doing investment operations. The new regulation allows insurance companies to offer these kinds of products, which balances the situation and helps to change that perception. As a bank, in order to sell saving and protection, you need to have an agency to make the distribution, that´s why most of the banks became shareholders or founders of the insurance companies. Insurance companies can benefit from the network and numbers of staff banks have, but you have to have a dedicated staff to sell insurance products in my opinion. It´s a product you have to sell, that´s not easy, and you have a ROI in at least 5 to 7 years, requiring patience. It's not like giving a loan. In Saudi Arabia, you don´t need to much effort to sell a loan on a car for example, people want it, the come in and get it. For us is tougher than that, but it is a beautiful challenge and I like it.
Insurance penetration and density in Saudi is the lowest in the region, which brings huge opportunities to the development of the business, everything needs to be done. I would like to know, as an industry, how could this penetration and density numbers be increased?
It's a very simple; you need to have new products that will meet the need of the people. Our main issue here, in Saudi Arabia, is that we don't come up with enough attractive new insurance products. You don't see insurance companies innovating, all, if not most of the players, are competing with the same products. We need to be more creative and understand the needs of our clients, understand our culture, and taking into account that, design the products. As I say, it will not be easy to sell at the beginning, but if you are patient you will succeed. If you come in every year with one or two new products it helps people to understand that insurance can really meet their core needs and wants. That's the main issue in my opinion. And secondly we need more regulation in order to increase penetration and density. I think at the end of this month all visitors to the Kingdom will need a travel insurance and in the near future all domestic service will be required a compulsory medical insurance. So the combination of innovation insurance companies and regulation are the key to bring our industry to the place it deserves.
How does WAFA intend to increase its market share? Are you thinking about any new products, as you were mentioning, that you intend to launch in the near future?
I'm a believer of the Blue Ocean Theory. What that theory really says is come up with a new market and product and leave the competition behind. I do want to compete with others in motor and medical, I will continue selling those products, but it shouldn't be my main source of income.
When you are in the Blue Ocean or in a new market, you really have to create a brand name and raise awareness. What is WAFA doing in order to build a stronger brand name and high-level reputation in the Saudi market?
Insurance products are based on a relationship of trust with our clients. They need to know that we´ll be there when needed and that´s where I am focusing now. I am a true believer in IT/technology, which really helps you to reduce costs and have a better control and knowledge over your clients. If or processes are well run our clients will benefit and their trust in us will increase. The change that I am trying to make will not come immediately. When I was offered a one year job here I talked to the board and said “ That´s not enough to change. At least I need two years. Then we´ll talk about it”. I think we are doing a good job. When I joined I tried not to focus on lots of figures, my main objective was to deal with the staff. My motto was “talk to them” and then you will understand what needs to be changed. I remember my first day at the office; I parked at the back of the building and came in through the main entrance. I checked the status of everything, how clean the entrance was, the toilets and the spaces for the employees. I immediately sensed that person in charge of HR wasn´t doing its job properly. I called him in and told him about my concerns and offered him the chance to change according to my directions or I would accept his resignation. You will not believe what happened when he resigned, that same month our sales increased to WAFA´s history record levels, 28 million in November, the had never achieved this number. Then December came with 36 million and 47 in January. The staff realized I came to support them so they can do their job better than ever before. This wouldn´t have been possible without the support of my board neither. We have a straightforward relationship and we always decide what is best for the company.
After three months, I asked the board for the approval of a salary adjustment. I asked for a budget of $84.5 million and they approved it. Now you can see beauty of what we have achieved after nine months, in 2014, our gross written premiums were worth $140 million, in 2015, $360 million. Our expenses have gone down as well, we are a well-run engine now and at the end that translates into better service and professionalism towards our customers, that in my opinion, we´ll give us the brand reputation we look for.
The UK insurance industry is the largest in Europe and the third largest in the world. It plays an essential part in the UK’s economic strength, managing investments of £1.8 trillion (equivalent to 25% of the UK’s total net worth). It stands as a great source of know-how and benchmarking opportunities. How important is for WAFA To build relationships with well-known international companies to carry out insurance operations on a large scale and how can UK companies be part of WAFA´s growth journey?
We would like to have strategic partnerships with top insurance companies, as shareholders or just know-how exchange with insurers such as Lloyd's and others. There is a huge potential for UK investors here, there are lots of consultancy opportunities or even act as brokers once SAMA approves them. UK has a lot of expertise in the insurance industry and customer service. We are ready to sit down and discuss any initiative or form of partnership with top players. I think this industry has huge potential and with the right partners it will be easier to make the change we want.
Mr. Al Sahli, you possess a Bachelor’s Degree of Agricultural Engineering, (King Faisal University), providing you a very interesting and unusual background for the insurance industry What brought you to the insurance industry and what is your vision for the company in the years to come?
When I graduated from high school, they offered me a scholarship to study chemical energy. Frankly I didn't want to, but because I finished my high school within two years instead of three, my father said, “Listen. You have all this saved money. You'd better try. If you like it, fine. If you don't, come back.” I went for six months and decided I didn't like it. I always had a passion for agriculture and decided to study my degree in Agricultural Engineering, will not believe it but in my house I have a garden about 700 square meter with all kinds of trees, roses and plants! But to really answer your question, I would say that I became CEO of WAFA because I really love insurance. It´s an industry were you can clearly see the results of your hard work. It is an industry full of logic and common sense and I love that, in my work, family, with my friends, all is a matter of logic and common sense. Insurance does not cover anything unless there is a reason behind, it´s logic and useful. By examining the needs and the reasons behind we can offer great products to help and protect our customers, and ultimately, change the Kingdom’s society, and that´s why I love it.