Insurance Article, The Insurance Times 2020, The Insurance Times July 2020

Consumer takes the front seat

Consumer takes the front seatKuwait enters into a new era of Insurance Regulations

Kuwait Govt has recently passed a new Insurance Law; an Official Gazette to this extent was released in Sep 2019. The New Law specifies the appointment of Insurance Regulatory Unit with new Insurance Regulations that would monitor all the insurance related activities in Kuwait.

Background:

Kuwait has been one of the oldest Insurance markets in entire GCC and MENA Regions. The awareness for Insurance started in early 60’s during the British Rule. After Independence in 1961 Kuwait started emerging as a strong economy, oil exports being its strong asset. Very soon it stood tall among all the OPEC countries, with huge revenues being received for its oil exports. It was during this period a need was felt to have an Insurance system in place along with the growing sphere of Banking. The visionary Management of New India Assurancethan under the Tata group envisaged the need and potentiality of Insurance in Kuwait, hence decided to start their expansion in Middle East starting from Kuwait. First operations of New India Assurance started in Kuwait in Nov 1963, as one of the pioneer Insurance Company of Kuwait. Due to the prevailing laws, New India Assurance forged a relationship with local leading Business house M/s Behbehani’s to act as their Agents. There after the journey continued with opening of numerous Insurance companies by different Foreign Insurance companies and local entrepreneurs.

Evolution:

Last half century saw many changes happening in the Insurance spectrum of Kuwait. Few Companies emerged as strong entities with huge capital infusion. Kuwait economy saw the rise and fall of many foreign and local companies along withthe emerging glory of the Takaful Companies, the companies over a period of time have taken a prominent position in entire Middle East and Arabian union.

The Change:

After the devastation attack by Iraq, there was a major setback for the Kuwait Economy, almost there was a grinding halt to all the development activities with utter chaos all-around. But the enterprising nature of local Kuwaiti entrepreneurs made them not to lose hope; they decided to rebuild their economy. Practically Kuwait was at ground zero, but the hopes and opportunities were unlimited. There was a demand for everything, right from basic food to the building of infrastructure. Kuwait had to be re-built, for which it needed lot of resources and other abilities. The re-building process started with a big bang, the bad memories and tears were wiped out and everyone stood firm to rebuild the country. In this process, banking and insurance had a great role to play, for financial stability and security. As each and every item, smallest to the biggest had to be imported there was a need for Insurance of imports, along with the insurance for all the infrastructure building activities.

This situation brought in more and more Insurance companies to start their operations in Kuwait. Early part of the new millennium saw the emerging of many small and big Insurance companies; most of these mushrooming companies were the Takaful companies, running as per the Sharia Principles, on the Islamic Banking pattern. There were not many restrictions for opening of a new Insurance company or for an exit or merger. But the fact remained that, the Insurance market was very small, with the number of companies growing day by day.

Kuwait Govt. brought the supervision of the Insurance sector under a Department working under Ministry of Commerce and Industry. It was decided that all Govt. related Insurance has to be placed only with the five big, local Insurance Companies of Kuwait, which had adequate financial stability and been listed in Kuwait Boursa. This decision was a bit discouraging to the other Foreign and a local company, as the major portion of business was from Public Sector only. However, the growing investments in private sector, could give some relief to the other companies. Big business houses started their own insurance companies to cater to their captive business apart from the available retail insurance in the market.

The Advanced Stage:

Though Govt. came out with timely decrees and instructions for the proper functioning of insurance Companies, it was not adequate to control the unacceptable activities of few insurance companies, which were basically running on monetary defaults,dishonoring of payments, not honoring the claims made by the consumers and without maintaining proper solvency levels etc. brokers were playing their own role in supporting the wrong doers. Genuine companies and the end consumers were put to severe hardships. The situation also saw filing of numerous legal cases against these companies. The situation was alarming, and the Govt of Kuwait which always stood for the rights and privileges of its citizens and residents, decided to do a complete overhauling of the insurance sector in Kuwait. This made them to emerge with a New Insurance Law, which promises an excellent service to the consumer and build a balance between various stake holders in the Insurance Industry.

New Regulations:

New Insurance Law No 125/2019 was enacted from 1st Sep 2019, amending various rules and acts related to Insurance activities. Going further, on 30 January 2020 the Kuwaiti Minister of Commerce and Industry issued a decision (No,24/2020) forming the Supreme Committee of the Insurance Regulation Unit. Now the Unit would prepare Regulations that would govern the entire activities of Insurance sector.

It is anticipated that, the regulations that are being drafted would cover every aspect of Insurance, and frame various eligibility norms for doing insurance business in Kuwait. Guidelines are being also framed for the proper functioning of foreign companies having their operations in Kuwait, though there are only few foreign companies now operating. The decree has already specified that, Manager posted to any foreign company in Kuwait has to obtain approval from the Unit, now in the new regulations the Regulatory Unit would also prescribe the experience levels for those Managers, as prescribed for the Brokers.

OUTCOME:

The decision taken by Kuwait Govt is remarkable; it has a long standing effect not only on the Insurance Industry of Kuwait but also on its entire economy. The Regulatory Unit would have a foolproof supervision on all activities related directly or indirectly to Insurance. The solvency margins would be well protected through mandatory Bank deposits, with proper fund allocations by the insurance companies towards various commitments.

The new Regulatory system would create a levelplaying field for all the companies to operate at their maximum levels. Licenses of pseudo companies would be cancelled, fake brokers would be eliminated. As every company has to have a Compliance Officer, who has to be invariably a Kuwaiti, would ensure proper discipline in the functioning of the companies, and it is also mandatory for every company to have an Insurance Actuary, whose role would be to have a check on the financial status of the company and issue proper certification on solvency levels.

THE FUTURE:

In the backdrop of the introduction of new regulations, there would be numerous benefits for every stake holder; there would be stability in the market, control on pricing, new product innovations, introduction of combi-packs and tailor made insurance products to suit to every risk profile. There would be adequate study on Risk Management, which would identify all loss making areas, and these areas would be properly addressed through various Risk Management techniques.

As the numbers of companies are many, amongst them many being small and medium scale companies we can expect many mergers and acquisitions to take place, only those companies with strong fundamentals and following prudent Underwriting would survive in the coming years. It is going to be a consumer driven market, where the consumer would in a position to dictate his wishes. He would be eligible for the best insurance productsthat he needs, at a most competitive price and terms, with offering of various value additions and an outstanding 24/7 customer service.

Now the companies have to shift their focus on having a proper study on Consumer behavior, their needs and requirements have to be properly understood, The consumer was taken for granted all through, would now occupy the center stage, and would be a deciding factor for the survival of any entity. His patronage and support would be prevalent in the growth, success and survival of any Insurance activity. In other words, the entire Insurance activity would be consumer centric.

Great days are ahead for the consumers in Kuwait who can look forward for a world-class Insurance service and facilities.

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