New avenues for growth: Personal coverage is widely expected to take off soon

Personal insurance is much less developed in Algeria than property and casualty lines, a reversal of the situation in most Western countries – where life tends to dominate – but par for the course in emerging markets. Personal insurance premiums also fell in annual terms for the entirety of 2012, as a new law banned firms from selling both life and non-life protection (obliging those that wish to do both to spin off separate personal insurance affiliates) the previous year.

However, the new regulation now appears to be stimulating some activity, with life premiums witnessing strong growth in late 2012 and early 2013. In addition, industry players say that the prospects for segments including medical and accident and travel insurance appear particularly promising.

UNDERDEVELOPED SEGMENT: In a market in which insurance is already under-developed, uptake of personal insurance lines has been particularly slow in Algeria. “Life insurance accounts for around 60% of the global insurance market compared to around 9% here,” Narimane Makhloufi, CEO of AXA Assurances Algérie Vie, told OBG. A number of factors help to explain this, such as the country’s comparatively generous social security regime, as well as the non-availability of some major product lines. In Western markets a large share of the life insurance segment is made up of savings products, which still don’t exist in Algeria.

The segment’s market share shrank further in 2012. However, industry figures say that this was to be expected following the implementation in 2011 of legislation passed in 2006 which mandated the separation of life and non-life business. The number of active players in the life segment dropped from several firms that offered both life and non-life products to just seven life firms in the first year after restructuring. Establishing new life affiliates is time-consuming and requires significant investments, with life insurers required to have capital of at least AD1bn (€9.5m) – though in practice many new life affiliates are still operating using resources and networks belonging to their parent companies.

SIGNS OF A TURNAROUND: As the market adjusts to the effects of restructuring, growth now appears to be returning to the personal insurance segment. Although premiums were down for the year as a whole, in the last quarter of 2012 they grew by 72% on the same period in 2011. According to the National Insurance Council (Conseil National des Assurances, CNA), much of the growth in the quarter was due to a single large contract being signed; however, even without this, the segment would still have grown at a rate of about 29%.

Premiums continued to expand in early 2013, rising by 48% in the first quarter of the year on the same period in 2012, to AD1.47bn (€13.5m). The state has made a serious effort to encourage the growth of life insurance by, for example, exempting premiums from value-added tax (VAT). As a result, sustained growth is expected. The president of the Algerian Union of Insurers and Reinsurers, Amara Latrous, in 2012 said that the market could reach AD50bn (€475m) and match the value of the non-life market within 10 years.

However, such growth will be dependent on several factors, such as the development of alternative sales channels, especially bancassurance. The service is still in its early days in Algeria, with life insurance only having started to be sold via banks in 2010. Industry figures say it is not yet working well as a sales channel, but that they expect this to change in the coming years.

EXPANDING NICHES: The largest line within the personal insurance market is group protection, which had a market share of 35.6% in the second half of 2012, followed by life and accidental death and disability insurance, with a share of 27%. While both grew in absolute terms, they have been losing ground to more rapidly expanding smaller product lines. Among such smaller niches in the personal insurance market, the opportunities for growth in the medical insurance segment appear particularly promising. “Lots of life companies have been created and are betting heavily on group health insurance products,” Yasmine Si Amer, the finance manager of Inter Partner Assistance, told OBG.