Matt, FPI celebrates 10 years in the Middle East next year. What have been the biggest changes you have seen during this time?
The life industry has continued to develop throughout the Gulf region with the emergence of new financial centres in Qatar and Dubai, along with developing legislative frameworks in other key markets such as the Kingdom of Saudi Arabia and the UAE.
Over this time there has been a huge increase in bancassurance business across most jurisdictions, as banks have built infrastructures to offer insurance services to expatriate and local national customers.
However, the growth of IFA and broker businesses has only mirrored the success of bancassurance in the UAE, which continues to support the highest density of distributors in the region. Significant intermediary communities haven’t grown in other regional markets.
The biggest change for FPI came in 2007 when we secured a federal insurance licence from the UAE Insurance Authority. This provided the platform for FPI to grow an onshore UAE business from new offices in Dubai’s Emaar Square to complement our offshore presence in the Dubai Airport Free Zone.
When you came into the job, what was your strategy and how has it changed over the years?
The 2004 strategy focused on growing the regional distribution base and diversifying FPI’s traditional UK expat client base into the broader Western expat and non-resident Indians (NRI) segments.
Securing the UAE Federal licence allowed us to strategically move to a full branch operation offering insurance functions within the region to support our clients and distributors. Today our operation is resourced to cover a whole range of functions including marketing, technical services, compliance and risk, servicing, new business and underwriting – in addition to the sales team, all based in Dubai. This builds on FPI’s core strategy of offering local expertise in local time zones in our key markets.
Our present strategy is to deepen our understanding of the expatriate market in the UAE, with a focus on both retirement planning and helping the NRI community to meet their financial goals. To this end we are investing in research to ensure we understand these particular markets and produce compelling propositions to help people achieve their financial goals.
As with many of the world’s major economies, the UAE suffered in the global financial crisis. Specifically, Dubai’s property bubble burst quite spectacularly in 2008. Do you think the country has now turned a corner?
During the boom years leading up to the crisis there was an air of invincibility about the UAE, but the sudden onset of the GFC focused minds on personal vulnerabilities and highlighted the need for people to take personal responsibility for their financial future. As a result we saw savings plan and protection sales increase during this period.
More recently we have seen a large increase in the number of new property developments – plans for approximately $40bn worth of developments were announced in the first half of this year alone. The UAE is benefiting from unrest within the wider region and the resulting Foreign Direct Investment is flowing into the property sector, with the UAE Central Bank reporting that a large percentage of new property purchases were made by cash buyers in Q1 2013.
In the past couple of years confidence has most definitely returned to the local market. People are taking a more reasoned approach and planning for the long term rather than looking to ‘get rich quick’ as in the past.
A charge sometimes levelled at IFAs selling life insurance products is that they are doing so to achieve high commission payments, particularly in the UAE. What would you say to this?
Over the past 10 years we have seen increased interest in IFAs rebating commission in lieu of charging fees.
However, IFA companies have to compete for talent and top advisers continue to be in great demand in the ultra-competitive UAE market. Accordingly it would be a challenge for an IFA firm to strategically move from upfront commissions, and at the same time to retain their top advisers. As long as the advisers hold the power in the “insurer-IFA firm-adviser-client” value chain, indemnified and initial commissions will continue to be market practice.
Many developed insurance markets have seen upfront commissions legislated against.
UAE broker regulations are reported to be ready for issue in the near future with the industry likely to be given 12 months to comply. The industry waits to see what will become ‘the letter of the law’.
Regulators in Hong Kong recently introduced changes to how certain investment-linked insurance products are sold. Do you anticipate any similar changes in the UAE?
The UAE Insurance Authority has appointed a law firm to conduct a review of the existing regulations and to perform a gap analysis. Accordingly it is expected that 2014 will see new regulations introduced throughout the year.
If the new regulations do not address investment-linked products it is inevitable that future regulatory reviews will, but the framework is likely to be different to the Hong Kong model.
Which products have proved popular this year?
2013 has been a great year for FPI’s level term assurance and critical illness plan – International Protector Middle East – and for our portfolio bond, Reserve.
With a maturing advisory market, more IFAs have been providing holistic financial planning for clients which starts with protection. International Protector Middle East won the Best Protection Product Middle East award at the 2013 IA Life Awards for the fourth year in succession.
The award success has been mirrored by the increase in volume of new business. Locating a specialist underwriting team in the Middle East has increased the strength of FPI’s protection proposition.
Following the global financial crisis, a robust economy has allowed expats to create wealth. Structuring this wealth in a portfolio bond has allowed advisers to protect client assets for the future.
Having the only UAE Insurance Authority licensed portfolio bond (Reserve) has allowed FPI to capture an attractive share of this market.
Are there any areas where sales have dropped – either expectedly or not?
Having taken the strategic decision to refocus the business on core territories and markets in 2013, FPI withdrew from the international corporate benefits market and from a number of jurisdictions in the Middle East and Africa.
2014 will see FPI focus on key global expat markets within the region where concentrated resources can deliver a competitive advantage to both IFAs and banks in their chosen markets.
The addition of David Thompson (regional sales director, MEA) and Jamie McNish (key account director, MEA) has strengthened FPI’s sales and distribution team, and provides partners with access to a wealth of sales management expertise, which has been built over a combined period of 50 years.
In March, company chief executive John Van Der Wielen announced FPI was scaling back in some areas – this included FPI selling its 30% stake in Malaysian JV AmLife and closing its Japan business to new sales. Has this also meant a re-investment in your area of the business?
The FPI strategy is to focus on writing business in areas where we are appropriately regulated and fully licensed.
For us in the UAE this means we are concentrating on distributing our products to expatriates, who make up by far the largest percentage of the UAE population. To this end we are seeing significant investment in our Dubai operation and this means the team will continue to grow as we move functions which are better placed in the branch from head office.
What’s next for the business?
FPI’s business model is to continue to support IFA and bank partners with local resources that understand their businesses. Our immediate focus will be on supporting our partners in complying with the new UAE broker and bank legislations, which are soon to be rolled out.
A significant opportunity will exist for the broker or bank that adapts its business model to meet the new regulatory requirements most effectively. In addition, there is a further significant opportunity for the insurance company that supports their distribution partners through this process most effectively. FPI is committed to providing this support and working with the industry as the UAE introduces and develops world-class standards of regulations.
There are developments in the pipeline that will strengthen our reputation as an international life insurer that offers the products and services customers want, allied to the superb service they have come to expect.
