Swiss insurer Zurich has big ambitions - it wants to be leading provider of life insurance products in the region.
It is certainly achievable. The company, which has been operating in the UAE for 25 years, is already one of the leading providers for life protection with more than Dh200 billion in cover in the Middle East. It also supplies employer-sponsored workplace savings schemes to about 70 companies across the GCC, with $1bn in assets under management.
"As a business, our position has grown. We have a 23 per cent market share in gross written premium terms; so our business is growing year on year," Walter Jopp, chief executive of Zurich Middle East, tells The National.
“Our biggest area in recent years has been the protection space because that is a massive need that is underserved. The penetration rate of pure life insurance is 0.6 per cent in this market – that is very, very low indeed and actually everybody should have life cover.”
However, like other global insurers in the region, the multinational has a niggling problem: dissatisfaction among UAE consumers with the long-term, contractual savings plans provided in the market. In Zurich’s case this applies to its Vista product, which encourages users to save for a fixed period of between five and 25 years.
These types of insurance wrappers that combine a life insurance policy with an investment plan have come under fire in recent years in the Emirates for being expensive and inflexible, as clients are locked in for a set period of time and must pay the full charges associated with the product if they exit early.
“We do listen to the feedback,” says Mr Jopp. “We are working on an array of new products and solutions and we will continue to put them out into the market.”
In 2016, the UAE Insurance Authority proposed an overhaul of the life insurance sector to improve how savings, investment and life insurance policies are sold. At the time the regulatory body said it had received "an alarming number of complaints" from residents mis-sold long-term savings products – provided by global insurers and distributed by IA-licensed financial advisers.
The Central Bank of the UAE also clamped down on mis-selling from banks and finance companies, revealing in September 2017 that 100 clients had money returned to them by banks due to the crackdown.
Since then a number of other changes occurred in this space.
Friends Provident International, another supplier of fixed-term plans, told The National in July 2017 the life industry "could do better".
Other providers pulled their fixed-term plans from the market altogether: Old Mutual stopped offering its managed savings account and managed pension accounts to new businesses in January 2017 and Italian insurance company Assicurazioni Generali said in March it was not taking any new business for its Vision and Choice plans from the UAE market "with immediate effect", as it undergoes a strategy review.
When asked if Zurich would pull its own product, Vista, Mr Jopp says “products change over time and we continuously change our solutions and that’s based on feedback and the market requirements and our own product development”.
IA’s third draft of its regulations was released in March, with no set date on when the regulations will come into force. Among the proposed measures for contractual savings plans is a cap of 90 per cent on the amount of commission paid out from a customer’s first year contributions.
Mr Jopp says Zurich has already started changing its business ready for new regulations, including investing heavily in IT.
‘We are engaging with our distribution partners; we’re engaging with the Emirates Insurance Association and we are feeding back to the IA to try and make sure we get regulation that is good for the market, good for the country, good for consumers and good for our distribution partners as well,” he says.
It is easy to see why change is needed. Scour the internet and it is awash with criticism of “expensive” and “inflexible” contractual savings plans, because advisers are remunerated upfront for selling the plan and several layers of fees are applied restricting the product’s performance.
Log on to Zurich’s website and download the Vista brochures and the list of charges is clearly spelt out. The 15 different charges include initial unit establishment charges of 4 per cent per annum, deducted monthly, management charges of 1 per cent based on the policy value, a monthly policy charge of Dh8.25, credit card charges of 1 per cent on the premium collected, fund investment charges, currency switch charges and more depending on which benefits a customers has signed up for.
There is also the surrender charge: pull out of a 25-year plan after one year and the charge is 100 per cent of the value of the initial units. After year two, it is 97.87 per cent and 93.62 per cent in year three.
Add these fees together and some experts cite the annual total charges on insurance-based savings plans at around 5 per cent over the lifetime of a plan.
“I don’t concur with that average of 5 per cent,” says Mr Jopp. “We have many happy clients that are in these products as well. The problem has been where people have taken out a commitment for a specific period of time and they have not lived up to that commitment. That is the broad issue.”
He says with people living longer and governments across the globe shifting the responsibility of the cost of retirement on to individuals, “there is an absolute need for people to save for the long term”.
With consumers traditionally unlikely to read the small print of any financial product they sign up to, it is up to the financial adviser distributing the product to ensure consumers understand the fine details.
While Mr Jopp says Zurich only works with those licensed by the IA, it is difficult for any product provider to ascertain if advisers are fully spelling out all the charges involved.
“I can’t comment on that,” he says. “We do have controls and compliance checks in place to check that. We have also invested very heavily on our website, on our literature, on our education – on the way the customer sees what they are purchasing. We work hard to use simple language that anybody can understand."
The bigger message, says Mr Jopp, is that all UAE residents should be thinking carefully about their retirement. And they should be turning to their employers to help them save for that goal.
“There is a massive opportunity here in the UAE for employers to be able to offer their employees a long-term savings plan,” he says. “That’s the gap that’s needed. But if your employer is not doing it, the onus is on you to save for the moment you retire.”
Zurich already has a flourishing corporate savings programme for employers, which Peter Cox, head of international pension plans sales at the firm, says comes with lower fees than those traditionally provided to retail investors because employers are buying services in bulk.
“There is no standard price for this – it really depends on anticipated assets under management so obviously the bigger the plan, the better and more cost-effective we can be," Mr Cox says. "Saying that, it is standard with this product that it’s clean, that there is no cost of entry and no cost of exit.
“When you take on an employer workplace savings solution, we accept that employees come and go – that’s part of the deal. So in terms of employees joining the plan there is no cost to that and in terms of employees accessing their benefits there is not cost to that. It is not a term-related contract – it’s open ended.”
Zurich is also keen to get involved into the UAE's potential overhaul of the end-of-service gratuity. At the Workers Incentives and End of Service Benefits Conference in Dubai in February, the government announced plans to "enhance" the gratuity payment and move it to a defined contribution scheme where contributions are paid based on an individual's salary as they progress through employment with contributions invested on an employee's behalf.
Dubai International Financial Centre is also pushing ahead with plans to replace expat workers' end-of-service gratuity with a funded, trust-based savings scheme on January 1 2020.
“We have a fully functional product already,” says Mr Cox. "We can engage with trustees, we have a functioning investment platform – it is a tried and tested product in that we have a number of big, quality employers in the region so, from our point of view, we are very interested in these developments because we know we can support them.”
Zurich's corporate savings plans and its term insurance products - which provide a cash lump sum if you die within a pre-agreed period - are complimented in the market. This is because they differ to whole-of-life insurance, such as the Vista or Futura products where your premiums are invested. The National put it to Mr Jopp that the company's reputation is being muddied by its expensive contractual savings products.
“We don’t want to damage our reputation,” he says, adding that there is a robust process in place “in line with local regulations” for Zurich customers to complain through if they are unhappy.
“What we need here is more competitors and better quality companies coming into this market," Mr Jopp adds. "Companies like Zurich are an asset, we are investing in new offices, we are employing over 300 people in this market, we are moving jobs into the UAE to get closer to the customers. That’s a completely different model to having a handful of people in the DIFC and a rep office.
“So we are fully committed and we are regulated. We are not running away from anything and we are investing very heavily and our Zurich 2.0 strategy going forward is to become the leading provider of life insurance products in this market.”
But with many users choosing to go down the DIY route to secure lower cost investments, the rise of robo-advisers and some financial services companies creating their own lower-cost contractual savings plan, the market also appears to crying out for a lower, simpler fee structure.
“It’s good to hear that the demand is there and we will do that,” ssays Mr Jopp.