To realise its full potential, the insurance market in Egypt looks to be in need of a total makeover, Sherine Nasr reports Except for the obligatory car insurance, almost no Egyptians even entertain the thought of buying insurance for their property, let alone coverage on the life or health of family members. The Egyptian dream instead focuses on securing a healthy pension to cover living costs after retirement. At that age, however, it is very likely that more costs will appear in the equation, such as medical expenses or the children's university tuition and marriage expenses. Insurance can cover this range of needs and more. However, for the vast majority of Egyptians, the word is still more often than not associated with the notion of a series of payments in return for nothing. "The notion of insuring different needs and activities to get more benefit simply does not exist in Egypt," said Mohamed Youssef, head of the Egyptian Insurance Supervisory Authority, speaking during the first AIG Impressions media club meeting in which he met a number of journalists who are specialised in economic issues, with the purpose of informing the media about the latest developments in the insurance market. AIG is one of the world's leading insurance and financial services organization which deliver its services to 50 million customers in more than130 countries. While it is a common practice in developed countries to insure all kinds of property, public utilities, means of transportation, etc, such is hardly the case in Egypt. As difficult to imagine it may be, there are only five main roads in the entire country insured against any hazards. Insurance for train passengers started only two years ago after the notorious accident in which six compartments on an overcrowded third-class train bound for Upper Egypt caught fire, taking the lives of almost 1,200 people. "We should not also overlook the country's treasure of exquisite buildings, museums, public utilities and any other form of property," said Youssef. The insurance market in Egypt is hardly new. The four public-owned insurance companies have been operating for decades now, and they provide a variety of services. There is also a handful of respectable international companies, dozens of private companies and hundreds of players in the market. However, the volume of investment in the market is very humble compared to the potential for Egypt. According to Youssef, the volume of investment in the market is estimated at LE29 billion, LE16 billion of which are those of the companies while the rest is invested in the various insurance funds. The value of the collected premiums during the second half of 2004 is estimated at LE2.4 billion while compensations were half that at around LE1.2 billion. "The figures are promising, yet Egypt is qualified to grow into the biggest insurance market in the Middle East," said Youssef. "To attain this goal, the market has to undergo a complete restructuring," said Youssef, who added that awareness about one of the most important sectors in the Egyptian economy needs to be fostered among decision- makers. "Ordinary people should also have more awareness of the benefits of insurance as a way of attaining certain goals and securing a decent life." A major aspect where reform needs to be addressed in the legislative aspect is the governing and regulating of insurance services. "We have to admit that much legislation is the most hindering to local companies and also discouraging to international companies." One clear example is the obligatory insurance imposed on car accidents of unidentified source, which according to the law must be compensated through one of the four publicly-owned insurance companies. While in the past, the compensations were nominal sums, at present they range from LE35,000 to LE80,000 according to the motor capacity. These huge payouts are hardly compatible with the small premiums the company receive. "This service alone has caused the public- owned companies some LE250 million in losses," said Youssef. As for international companies, it is important to keep in mind they will not enter the Egyptian market without the prospect of strong profits. "The Egyptian market is in need of those companies and their variable, good- quality service in order to grow into the biggest market in the region," he said. According to Youssef, six major pieces of legislation to reform the laws regulating the market have been referred to the People's Assembly for discussion. "We hope that once these reforms are ratified, more burdens will be removed." Another major aspect of reform is the internal restructuring of the four publicly owned insurance companies which has been fervently carried out since the appointment of Mahmoud Mohieddin as investment minister. Mohieddin made it clear that unless certain targets are obtained, heads will roll among the companies' leaderships. Putting one or more of the four publicly owned companies up for privatisation has also been proposed. While speculation about one company or another is rife, no specific company has yet been confirmed. Addressing different players in the market through well-organised entities is also one of the main targets of the authority. "We need to establish direct contact with these people in order to ensure stability in the market," said Youssef. Though these reforms are a step in the right direction, the country must exert more effort to turn insurance into a culture rather merely a financial practice.
