Egypt Insurance Market 2016

 

Distribution Channels

The main distribution channel for private individuals is an insurance company's direct sales force, agents or individual brokers.

Large corporate clients generally arrange insurance on a direct basis or, in the case of multinational clients, through the international brokers present in the market. Local brokers are very active amongst Egypt's small and medium-sized enterprises.

Law No 10 of 1981, Law on Insurance Supervision and Control in Egypt, makes no distinction between agents and brokers, referring instead to intermediaries.

Agents are usually individuals tied to a single company, earning commission on business introduced; broking though has evolved over the last decade. Brokers were traditionally individuals working with several companies but Law No 118 of 2008 introduced recognition for the first time of corporate brokers, who are subject to various financial and professional requirements.  

Agents and brokers compete in all classes of business but many have little knowledge of insurance and are really only business producers, limiting their activity to introducing the client to the insurance company. About 55 such brokers are in operation, of which about a dozen are regarded as professional and three (Gras Savoye, Marsh and Allied Arab Assurance) are the market leaders. Corporate brokers are said to account for about half of the total broker market.

Since May 2013 when the Central Bank prohibition on bancassurance was lifted and the Egyptian Financial Supervisory Authority re-activated such arrangements, bancassurance as such remains still in its infancy, although it has attracted considerable interest. It has made much more impact in the life than in the non-life sector. A leading broker has links with several banks providing insurance from a number of insurers but otherwise bancassurance agreements between banks and insurers are few. With some restructuring and re-branding within the Egyptian banking sector ongoing, they are looking to differentiate themselves by adding insurance to their range of services.

The internet is not used as an insurance sales tool in Egypt but EFSA Resolution No 122 of 2015 On the organization of production and distribution of some insurance companies to policyholders through information systems and networks is the first step towards establishing a regulatory environment for online sales, and allows insurers to offer compulsory motor third party liability, travel and term life insurance online.

In the absence of any firm data, the table below can only be a rough estimate of the importance of the Different distribution channels over the last available three years, during which time there has been little change.
  2013 2014 2015
 Direct (%)  35 35 35
 Broker (%)  25 25 25
 Agent (%)  35 35 35
 Bancassurance (%)  5 5 5
These figures will vary significantly by company, with Misr for instance having up to 1,000 tied agents, and by line of business, with up to 90% of aviation and oil business being handled direct. The broker share of commercial lines is about 40% with agents and brokers (corporate) accounting for the balance in equal measure; agents dominate personal lines with 75% while brokers (individual) account for 15% and 10% is direct.  


E-Commerce
 

In September 2016 EFSA issued Decision No 805 of 2016 regulating websites of (re)insurance companies and intermediaries to ensure that information provided to clients is not incomplete, inaccurate or misleading. The decision requires (re)insurer and intermediary websites to include a company profile, as well as promotional or guidance material to introduce the services provided.  

EFSA issued Decision Nos 729 and 730 regarding the issuance and distribution of electronic policies. The decisions allow the issuance of electronic policies through a number of companies specified by EFSA exclusively for each type, including insurance companies and travel agencies.

Decision No 730 of 2016 states that the website used to apply for the insurance and the electronic policy must make it clear that insurance agents are only a channel for marketing and sales, that they do not pay any claims, and that full responsibility remains with the insurance company only.

Insurance policies must specify that insurance cover only begins on the payment of the first instalment by the insured and state that the insurance policy does not require the signature of the insured or the insured.  

As regards compulsory MTPL insurance, the number of insurance companies which can issue an electronic policy is limited to no more than two insurance companies within a traffic unit. Travel insurance policies can be made available on a direct basis through an insurer's website or through tourism/travel agencies or airlines licensed by EFSA. In every case the value of the insurance policy shall not be more than EGP 500,000 (USD 33,333) or the equivalent in the other currencies.

Any insurance company which wants to sell online must obtain approval from EFSA. In addition, insurance companies must establish call centres to meet the needs of insureds using electronic policies and to respond to their enquiries and complaints. Decision No 729 of 2016 set out the necessary technological regulations on network security and data privacy, inter alia.  

Other Direct Marketing

Direct telesales have not been tried and publicity is confined mainly to press advertising. Market sources complain, however, that this process is made difficult because advertisements must be submitted to the supervisor for approval prior to their publication.

Direct mail shots are not used in the market and there is very little advertising of insurance products. The Egyptian Financial Supervisory Authority issued Decision No 36 Regarding Marketing Insurance Products through Egypt Post in February 2014. This allows insurance companies to market insurance products through post office branches.  

Bancassurance  

An amendment in 2008 to Law No 10 of 1981, Law on Insurance Supervision and Control in Egypt, had set up a framework for the operation of bancassurance but in early 2009 the Central Bank prohibited any bancassurance transactions until it could place a more specific regulatory framework in place, addressing some concerns that had arisen over the operation of bancassurance to that date. One of these was a lack of expertise amongst banks as regards the insurance products they were selling, which might have been prejudicial to the consumer.

In May 2013 the Central Bank prohibition on bancassurance was lifted by Decree No 1010/2013 on the Regulatory Framework for Banks Practising Bancassurance; this was followed by Decree No 36/2013 on Marketing of Insurance Products Through Banks Registered with the CBE issued by the Egyptian Financial Supervisory Authority and which re-activated such arrangements. The Central Bank initially restricted each bank to just two bancassurance deals (life and non-life) with either takaful or commercial insurers, but now banks can work with both types of company.

Three years on, bancassurance as such is still in its infancy, although it has attracted considerable interest, and it is making much more impact in the life than in the non-life sector. A leading broker has links with several banks providing insurance from a number of insurers but otherwise bancassurance agreements between banks and insurers are few.

The western practice of banks using bank staff to sell personal insurance products through their branch networks is not permitted and banks are not allowed to receive commissions, so the effectiveness of the bancassurance system is greatly diluted.  

Business introduced by banks has traditionally been mainly loan-driven, involving predominantly motor insurance (70% of new vehicle sales are made with a bank loan), property and to a lesser extent householders' comprehensive. Insurance may be placed on an individual or block basis, covering all insurances relating to motor or property loans issued by a bank, with no single model predominating.  


Agencies  

Estimates have put the number of registered intermediaries in the market at around 18,000, of which perhaps 8,000 are active.

Law No 10 of 1981, Law on Insurance Supervision and Control in Egypt, makes no distinction between agents and brokers, referring instead to intermediaries.

Tied agents work for a single company, in theory at least: in practice, if the business is refused by their insurer, it may be placed with another company through a family member or a friend. By Decree No 245 of 2008, insurance company employees, except those working in sales and marketing, are not allowed to be insurance agents.

Agents are supervised by the insurance regulator and licences are granted for periods of three years. The maximum registration fee is EGP 10,000 (USD 1,030) for corporate intermediaries and EGP 1,000 (USD 103) for individuals.  


Insurance Brokers  

Law No 118 of 2008 introduced the recognition of corporate brokers. In accordance with Decree No 245 of 2008, all intermediaries are required to hold one of three specified academic qualifications, to follow a training course approved by the supervisor and to pass an entry examination. In addition, corporate intermediaries must supply the company's articles of association, an extract of its commercial registration, a court certificate showing that it has never been declared bankrupt, a feasibility study, a professional liability policy, details of the chief executive officer, a declaration that all persons working as intermediaries in the company are registered with the supervisor, proof of payment of the registration fee and such other documents as may be requested.

Minimum limits for professional indemnity insurance for brokers have been revised and for corporate brokers are now EGP 2mn (USD 205,973) for the first three years of operation and then 25% of annual commission income averaged over three years, subject to a minimum of EGP 2.5mn (USD 257,467); EGP 50,000 (USD 5,149) is the figure for individual brokers over the first three years, then 50% of annual commission income averaged over three years. Cover is available from various local insurers but those involved in multinational placements also have cover obtained from international markets. Corporate brokers must be joint stock companies, with a minimum capital of EGP 2mn (USD 205,973) of which at least 50% is paid at inception and the remainder within five years.

EFSA Decision No 23 Regarding the Regulated Rules for Insurance Brokerage Practices in Egypt issued in February 2014 introduced amended governance rules for insurance brokers.
 

Intermediaries' Commissions

The following percentages remain broadly representative of the total rates currently found, excluding an additional percentage for prompt payment which also varies according to the period.
Fire  20.0 to 25.0 
Theft  20.0 to 25.0 
Accident  17.5 to 22.5 
Liability  17.5 to 22.5 
Engineering  10.0 to 15.0 
Marine hull  6.0 to 10.0 
Marine cargo  14.0 to 20.0
Aviation   5.0 to 7.5 
Motor private  15.0 (maximum)
Motor commercial   10.0 to 13.0