The insurance sector is expected to be a key beneficiary of Saudi Arabia’s recent decision to lift its ban on female drivers, a move that should also have a strong impact on automotive sales and services industries.
Almost 25% of Saudi women have applied for a driving licence since King Salman bin Abdulaziz Al Saud issued the decree allowing women to drive in late June, while 61% intend to do so in the future, according to an August survey by online polling firm YouGov. Some 78% of respondents said they plan to buy a car, a purchase that will necessitate insurance coverage under the unified compulsory motor insurance policy.
The impact of this new demand will be significant, according to a March report by financial consultancy PwC. By 2020 there could be 3m female drivers on Saudi Arabia’s roads, approximately 20% of the total, and PwC forecasts that a larger pool of drivers will see the vehicle insurance market grow by 9% per annum through to 2020.
If achieved, this growth would bring the value of the sector to SR30bn ($8bn), which would represent a near three-fold increase on the SR10.8bn ($2.9bn) in premium collected in 2017. That year underwriters saw total premium decline by 5% due to lower comprehensive insurance policy sales and reduced prices stemming from tighter competition in the marketplace.
Growth in the number of male drivers is expected to be modest by comparison, with projections that it will rise from 9m in 2017 to 9.5m by 2020, although the uptick should offer another, albeit smaller, opportunity for underwriters to expand their client lists.
Moreover, as insurance firms roll out cover to an increasingly large portfolio of female clients, this should boost employment opportunities for women in the industry: according to local media, several players stated that there will be a greater number of women employed in local offices to deal with the new customers.
Commercial vehicle coverage is expected to grow alongside the uptake of personal motor insurance, with the Public Transport Authority announcing in mid-August that women who hold general licences and clean conduct records may register as taxi drivers. This is with the caveat that these drivers only pick up pre-arranged fares and groups comprising at least one Saudi woman.
The growing use of ride-hailing apps such as Careem and Uber in the domestic market is also set to boost commercial cover. At the beginning of August, Uber announced a partnership with underwriter AXA to provide coverage for its drivers in Saudi Arabia, including newly hired women.
Uber will fully fund insurance policies to cover some of the cost of injury in the event of an accident while driving passengers or making deliveries through its applications. The coverage will allow insured parties to claim for medical expenses and lost earning opportunities.
The increase in business stemming from the entry of women into the driving community will be welcome given the high number of uninsured vehicles in the country.
According to industry statistics, some 55% of vehicles on Saudi roads are currently uninsured, a rate similar to that of two years ago.
Nevertheless, the Saudi Arabian Monetary Authority (SAMA) continues to adjust the regulatory framework governing the segment to improve penetration rates. One such move was undertaken in January, when SAMA made it obligatory for insurance firms to provide cover against natural disasters under their comprehensive motor policies.
In August another update to the unified compulsory motor insurance policy was rolled out by SAMA, mandating that a driver who makes a claim is covered even if their licence has expired, whereas before this was not possible.
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×Following delays, the long-awaited GCC Railway looks likely to be revitalised, a move that could transform trade and connectivity across the Gulf.
Amidst a slowdown in the Middle East’s private equity industry, Jordan’s small and medium-sized enterprises (SMEs) are set to get a boost from a new private equity fund.
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
