«Insurance companies sell a promise»
What do you think about the insurance market in Algeria?
The Algerian market still suffers from the impact of the economic situation and local companies are struggling to reach the two-figure growth registered between 2003 and 2013. The percentage of automobile insurance sales growth, excluding automobiles, has not been able to compensate for the decline in automobile insurance issues, which continue, year after year, to account more than half of total market sales.The deceleration in investment rates and the budget cuts made by companies and consumers in terms of insurance have also contributed to this decline, which is accentuated, admittedly, by price competition between local companies.In terms of marketing, insurance companies are making more and more efforts to improve their services by developing, even timidly, new products and offering new services in the form of assistance under various formulas.
The Ministry of Finance's directives regarding the settlement of automobile damage are showing results, and it should be noted that more than 200,000 files have been settled for an amount of nearly eight billion dinars, for the account of the insured beneficiaries. In addition, the market actors are working to contribute effectively through proposals within the framework of the Algerian Union of Insurance and Reinsurance Companies , in the effort of adapting the legislative framework governing insurance, making it more flexible and likely to anticipate future developments in our market, to the digital era.As a result, the sector continues to accomplish its mission by providing the guarantees sought by insureds and is deploying and remains, despite everything, ready to change in order to improve its contribution to the economy.
Certain analysts mention the necessity of a regulatory authority independent of the Ministry of Finance, given that the current supervisory authority is under the authority of this Ministry, which is at the same time the representative of the owner - the State - of the insurance of public economic enterprises. What is your opinion?
I would first like to highlight the necessity and importance of State control over the insurance business and in particular over the companies that provide it. Indeed, these companies, public or private, sell a promise: that which consists in repairing the damage in the event of accidents and, thus, pool the risks with the premiums they receive in advance. In other words, they manage a risk mutuality as prudently as possible to ensure its balance.
In a universal way, this control goes from the approval of the company before its creation, to its possible liquidation, passing by, and it is the most important, a control on the site and on documents during all the company's existence. During this period, particular attention is paid to the documents made available to the public and the permanent solvency of the company. This control also covers distribution networks. (Brokers, general agents and direct agencies). This brief remainder shows, if need be, all the work that the sector and the supervisory authority have to do to progressively develop our market towards more discipline and professionalism.
That being said, and in response to your question, I will say that whatever model is adopted, its foundation will always remain that of the Insurance Department of the Ministry of Finance.
It is true that the current organizational structure places the supervisory authority in a twofold role: supervising all market players and, even indirectly, managing public insurance companies through boards of directors and general meetings.
The establishment of a supervisory agency will allow the separation of the two tasks hitherto performed by the same supervisory authority and would strengthen the independence of supervision by removing any suspicion of partiality.
Precisely, some privately owned companies speak of unfair competition when it comes to large markets that benefit only public companies. Do you agree with that?
That is something that this independent regulatory authority will be able to handle. In the meantime, it is true that we regularly hear this speech and the answer can only be given by the insureds themselves. While I am in favor of not discriminating against companies, according to the nature of their shareholding, but rather on the quality of their service and their ability to meet their commitments, I cannot avoid the observation that the majority of private insurance companies have remained, in terms of size and capitalisation, almost at the same level as when they were created.
We cannot blame the industrial groups, which are in their right to require insurance companies a certain level of capital to be able to claim insurance for their property and liabilities. Share capital is the first guarantee of an insurance company's solvency and its ability to honor its commitments in case of a damaging event.
One also speaks about a glaring lack of executives, engineers and technicians in the field, despite the presence in Algeria of a multitude of training institutes...
Generally speaking, there is no lack of training schools for insurance professionals and the companies' training centers complement the work of these schools, among which I can cite EHEA (Ecole de Hautes Etudes d'Assurance) and IHAEF (Institut des Hautes Etudes Financières), which cover most of the sector's needs in terms of technical insurance executives.
In the same vein, the SAA has set up a training programe with the EHEA for high-level risk assessment engineers, in which pre-selected poly-technicians have received six-month training, during which they have been introduced to the insurance profession and, above all, to prevention, protection and risk assessment techniques. Today in service, these engineering executives provide both value to the company and its customers. What is currently needed is an institute for the training of actuarial experts and schools to train our executives in management or in new technologies to assist our institutions to make the transition to a better digital environment.
Is the insurance business currently profitable? Who is the beneficiary?
It is obvious that the insurance business is profitable for all parties concerned: it is enough to look at the importance of the compensation paid to companies in recent years as well as to individuals in the context of automobile insurance in particular.
Under the last-named, the SAA provides approximately 16 billion DA/year.
The insurance business also benefits the State by investing large amounts with the Treasury. Outstanding investments in government securities now exceed 200 billion dinars.
Profitability also benefits the shareholders of insurance companies, through the dividends they recover. Overall, despite the difficult context, the insurance business managed to achieve a return on equity of more than 8%, which is a performance given the current economic difficulties.
Citizens talk about unpaid damages. What about SAA insurance claims payments?
It is true that in a completely natural way, insureds, citizens or companies reproach insurers for not paying damages or, in the best of cases, for compensating them with considerable delay. Actually, one must understand that in the settlement of a claim, there are three parts:
- The insured himself or the beneficiary of the contract,
- The expert, an independent professional,
- The insurance company's claims adjuster.
In addition to which is a fourth part, in civil liability insurance (particularly in automobile) that is the opponent or his insurance company. Whether it is for the delay or the non payment, the responsibility can be with one or the other of the parts even if I admit it voluntarily, that the biggest part of responsibility rests with the insurance company. The insured's fault manifests itself either when he does not provide part or all of the proof of his losses or in the case where he has not purchased adequate cover for his risks allowing his indemnity. The expert may not have, in time, the information and documents needed to complete his report. Company procedures can also cause delays.
It must also be recognized that the declarations, sometimes contradictory, of the parties involved in an accident, and the non-signature of a contradictory accident report, often constitute one of the sources of delays, particularly in claims involving two antagonists insured with a different company. Regarding the SAA, our claims settlement currency is clear and could interest your readers. On every occasion, we remind our employees that the prompt and diligent settlement of claims benefits the SAA in two ways: By settling a claim, we take it out of our reserves or, more simply, out of our debts, and the adage that "who pays his debts is enriched" applies fully in this case. Moreover, when the customer is satisfied with our service, we have every chance, and without much effort, to have his loyalty.
The implementation of any approach is reflected in the level of automobile insurance settlements which average 16 billion Dinars/year as I had mentioned before, preceded by SAA great satisfaction in having settled, at the ENIE, a damage claim of about one billion dinars, six months after its occurrence.
What is your assessment of the SAA since your election and what are your technical, human and material objectives?
I am not going to talk about my assessment since I joined the SAA but about SAA's assessment after 55 years of activity and existence. If we limit ourselves to the last five years we can say that the SAA has already benefited in 2013 from a period of opulence and was able to achieve double-figure growth solely due to automobile insurance, which represented more than 80% of its revenues.
Thus, we established the strategic objective of diversifying the company's business portfolio and gradually reducing the relative share of the automotive sector from 80 to 60% of the total portfolio through the development of other business segments.
To achieve this goal, we had to persuade our distribution network collaborators, gradually adding young experience, to make the necessary effort while continuing to develop the automotive portfolio, to practice the other branches and to become more and more efficient, commercially speaking of the other risks of individuals, SMEs and the agricultural sector.
After three years, we believe that this strategy is already beginning to pay off as we succeed year after year in achieving even modest growth, but in a diversification of the portfolio that has begun.
Of course, this has been possible thanks to the growing trust of our customers and the efforts of our partners and collaborators. The modernization of management and our information system as well as the increasing importance we give to training, particularly in insurance techniques and professions related to insurance (actuaries, risk assessment engineers) also contribute to the success of this strategy.
The redesign of certain insurance policies and the introduction of new products for individuals, businesses and the agricultural world are beginning to be appreciated by our customers and leave me optimistic for the future of the SAA investment portfolio. In terms of material resources,
the acquisition of the high standing building in the Bab-Ezzouar business district has enabled us to offer the best working conditions to the company's personnel as well as to group together all the structures of the general management, which ensures efficiency in our management.
Always at the material level, the redesign of our agencies and Regional Directions on the basis of the new graphic charter, will welcome our customers in the best possible conditions and a pleasant and adequate working environment.
In short, the last three years have been used to modernize the SAA and lay the foundations for its commercial sustainability and hence, its sustainable profitability.
Has Algeria an insurance policy culture?
In fact, it is the economic model followed by Algeria at all times that makes the citizen and even the company in some cases not spontaneously get a insurance. This is the case with health and personal insurance where the social security system and free health care have not helped to create the reflex to go and insure oneself and one's family before thinking about insuring one's property.
For property insurance, it is sufficient to take the case of compulsory insurance against the effects of natural disasters to understand that the fact that the State intercedes to take charge of the victims in order to relocate them does not encourage the voluntary act of buying insurance cover for its needs. The same examples can be found in the agricultural world.
I think you'll agree that it's not just about culture, it's about the environment. This means that a lot of work and effort await insurance companies at the marketing level to make citizens aware of the importance of insuring themselves if we want to increase the level of insurance coverage in our economy.
Islamic finance and takaful (Islamic insurance) have also been the subject of much discussion recently. What is your view of this alternative?
The observation to be made is that the concept of Islamic finance has proved its worth in Western countries. Having said that, I think that as far as insurance is concerned, the use of Takaful is necessary to develop capitalisation insurance in particular (supplementary retirement, life insurance, in the event of death, etc.), which, in their current form, are rejected because they are based on interest. The formula exists and can be extended to other property insurance.
This will undoubtedly encourage those who, until then, refuse to protect themselves for religious considerations, to buy blankets in conformity with their convictions. We will undoubtedly see the establishment of a system that protects people and property, which will gradually contribute to building a real insurance market and enable the State to redirect the colossal amounts hitherto devoted to compensating victims for each harmful event or disaster to other truly sovereign areas.
The important thing is not to be hasty and to take the time needed to put in place a system adapted to our society and a regulation that is irreproachable in every respect in accordance with Muslim law so that no one can find fault with it. It is obvious that the market interest is that takafulou alternative insurance will cohabit seamlessly with the traditional insurance system.