Untapped potential

Life insurance penetration levels remain extraordinarily low in Oman and across the GCC region. However, the rise of the affluent and middle class with more purchasing power, a growing awareness of insurance products and the advent of sharia-compliant life insurance products are expected to boost the industry in the long run

The wisdom of insurance is preparing yourself for life’s uncertainties. When you buy insurance policies you are investing to safeguard your future from unforeseen crises and provide security for you and your family. Life insurance plans are financial tools to help you save over many years and invest for the future.

However, in the Middle East and North Africa (MENA), a region with a total population of close to 380 million and a combined gross domestic product (GDP) of over $3.7tn, life insurance penetration levels remain extraordinarily low. At a share of less than 15 per cent, life insurance continues to play a relatively minor role, in comparison with its global share of 56 per cent. Oman like most of its GCC neighbours, has one of the highest uninsured population in the world.

SrinivasanSays AR Srinivasan, CEO of Falcon Insurance, “In countries like India, there are substantial tax benefits for investing in life insurance, while in the western world people use life insurance as a tool for retirement planning. But such investments in life insurance are very minimal in Oman and across the GCC region. In Oman, it is partly because of the social custom and partly because there are fewer people with lots of disposable income.”

However, the rising wealth of a young population, an increase in expatriate numbers and a growing awareness of insurance products are all helping to boost the industry, despite the fact that affluent expatriates in the GCC generally prefer to take life insurance schemes in their home countries.

Srinivasan says there are some gradual changes visible in the trend, with more educated people, especially working couples, coming forward to invest in life insurance as a tool of saving for retirement, children’s education, marriage etc. “There is a substantial market and I would expect it to pick up and grow considerably in the next seven to eight years.,” he avers.

He adds that despite low-penetration, Falcon has introduced a variety of life products since the launch of its life insurance division in 2008, and the company is looking to tap this growing market.

Abdullah Tamman Al MaashaniAbdullah Tamman Al Mashani, DGM – institutional sales and products development, bank Muscat, corroborates saying, “The affluent and middle class supported by their cash reserves and purchasing power will continue to positively look at wealth management products, especially insurance. For a vast majority of people in Oman, the usage of insurance is limited to mandatory products like motor insurance and credit protection products. However, this is fast changing as people are aware of the insurance benefits and willing to look at the details if they are provided with a conducive engagement mode with the bank. With health related expenses going up and also the rationalisation measures adopted by many entities, health insurance is certainly gaining momentum.”

In 2015, Bank Muscat signed a 10-year partnership with AXA Gulf to offer life insurance and health products to customers. “Bank Muscat’s strategy with AXA is to build propositions and not products because propositions help the partnership to differentiate from the rest of the crowd,” says Abdullah. “The bank and the insurer are striving to maintain a differentiated offering via various customer segments in the life insurance and health space. One of the key vectors of partnership transformation in the near future will be in the form of digitalisation and customisation. When product substitution becomes common place in the market, customer-centric product innovation and the way it is offered will hold the key in making the difference and that is what the partnership is aspiring for.”

He adds, “The life insurance range of products offered by the bank from AXA stand out in the market, offering substantial coverage and benefits at a reasonable cost and hence customers have accepted them quite well.”

Health insurance is a need-based product and by all means it complements the medical facilities provided by the state and employers. “The proposition launched by Bank Muscat with AXA is very unique and it has seven different variants for customers to choose from. The product is gaining more significance in the context of rationalisation done my many entities for auxiliary health benefits and also because of the fact that it provides seamless access to health facilities throughout the globe,” explains Abdullah.

Opportunities galore

Srinivasan stresses the importance of generating more awareness among the public about the benefits of taking insurance policies, especially with regard to taking personal insurance like travel insurance and insuring household contents against fire, flood and burglary. “People insure their houses when they buy a new one because it has a loan and it is mandatory, but hardly do they bother about insuring their household items, though it requires a very low investment. When Cyclone Gonu hit Oman back in 2007, it was an eye-opener for many. But still the number of people who are going for it is very minimal today. And hardly anybody takes travel insurance, which covers emergency medical expenses, baggage loses, and even compensations in case your flight is delayed, all together at a cost of RO15 to 20.”

However he says there is substantial growth in insurance policy taken for security against borrowing, housing loan, car loan, personal loan etc. “Earlier it was directly via banks, but now people are taking their own insurance. Now they are aware that taking their own insurance is easier and affordable in the long run,” he adds.

On the regulatory front, the Capital Market Authority (CMC) has urged all Omani insurers to obtain regulatory approval before marketing any investment-linked products or creating any linked funds.

In a circular distributed to insurers recently, the regulator also said that insurers which had already commenced such business must renew their approvals within six months. The CMA’s new rules for marketing investment-linked insurance products in the Sultanate include minimum standards and disclosure requirements.

Investment in insurance companies

Talking about the broader picture of investment in the insurance sector, Srinivasan observes, “In 2014, there was a Royal Decree that mandated all local insurance companies to have a minimum capital of RO10mn and they all be publicly listed. Today, in Oman’s insurance sector, there are 11 Omani national companies and a few foreign companies. Out of this, only four are listed and have the minimum capital, while rest of the companies need to raise the capital and become public before the end of next year. In terms of investment, this is an opportunity to invest in insurance companies.”

However he adds as an investment opportunity one cannot expect huge returns immediately. “Insurance companies are always slow to grow because initially they have to build the reserves as the company grows. Only once they reach a critical mass, would they be able to start paying a good dividend. But since these companies are already established, there is still good opportunity for investors.”


In the MENA and wider GCC, of late banks and insurers are taking a more holistic approach towards practising bancassurance, providing copious opportunities for investors. Bank Muscat, in partnership with American International Group, introduced a range of insurance products under Bancassurance.

Abdullah says the bank envisages expanding the bancassurance offering from the traditional branch banking model to multi-channel, multi-product distribution like telemarketing, digital and alternate channels. The additional channels would ensure that customers are getting products at a very competitive rate and also according to their preference.

“Bank Muscat and AIG have worked together in developing a range of low-cost but unique insurance products. The offerings range from protecting individuals from personal accident, expenses arising out of accidents, coverage from critical illness, protecting home and the contents, travel insurance etc. The bank has also launched an elite class of product for high net worth individuals to protect their belongings. The niche product covers art, jewels, antiques and other valuables. Most of these offerings are tailor-made according to the requirement of clients and hence they have wide appeal among customers,” explains Abdullah.

In another development, National Bank of Oman (NBO) recently partnered with Vision Insurance Company to launch the “Himayati Elite Life Plan”, a life and lifestyle protection plan. This high-value bancassurance product offers a truly comprehensive package to protect customers in unforeseen events, providing RO100,000 life insurance coverage with no medical tests required. In addition, the plan includes free annual travel insurance for the family for an unlimited number of trips covering personal accidents, medical emergencies, travel hazards and legal liabilities. Other benefits includes free gadget insurance to protect clients’ valuables such as, Smartphones, Tablets and Laptops, against damage, loss or theft.

Commenting on the launch, John Chang, general manager and chief retail banking officer at NBO, said, “Building on our customers’ feedback, we have developed a comprehensive tailor-made protection plan to cater to their lifestyles and financial needs. The Himayati Elite Life plan was designed to ensure that our customers and their families are financially protected at all times.” The Himayati Elite Life plan is available through the bank’s extensive network of branches and Sadara centers across the Sultanate.


The development and acceptance of sharia-compliant life insurance products, the improvements in regulations in several GCC countries (e.g. mandating health and motor insurance) and increasing awareness about the benefits of insurance, have gradually brought about a change in the market dynamics in the region.

It’s widely believed that the majority of the residents have so far refrained from taking life cover mainly for religious reasons. Therefore, the potential for growth is higher in the family Takaful segment compared to conventional life insurance. But what is the status in Oman which has seen the introduction of Takaful in the insurance market only recently?

Has the advent of Takaful in Oman opened up new vistas in insurance sector and has it attracted more people who were hitherto reluctant to join in on religious grounds? Srinivasan replies in negative. “All Takaful companies have actually eaten into the business of existing companies. It had been believed that there were a lot of businesses which were not insured because there was no Islamic insurance. We have not really seen any new product segment being introduced in Oman’s insurance sector. Instead, all Takaful companies are competing with existing players in the existing businesses,” he elucidates.

As Takaful is still in a burgeoning stage in Oman, breaking through into the mainstream might be easier said than done. Therefore it’s too early to predict its potential in charting the road to mass markets.

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