In a tough market, software investment pays dividends

When competition for business is as intense as it is for insurance brokers in the Middle East, even the most subtle improvement in business efficiency can give a crucial competitive edge.

UAE-based Gargash Insurance Services has already invested significantly in technology, having overhauled its personal lines business onto a paperless electronic system. Its commercial portfolio is expected to be paperless by the end of the year.

Managing director Mustafa Vazayil claims Gargash was the first UAE broker to implement online premium payments around 10 years ago, and is currently the only local broker with a smartphone app allowing clients to access quotations, claims and policy details.

“Competition among brokers in the UAE often boils down to price rather than quality of service,” Vazayil says. “But if you start eroding margins to obtain business, you will have less to invest in the resources needed to service your clients.”

“Our objective is to be completely paperless and web-enabled so our clients can look at their accounts, transactions, policy details, etcetera online. We believe our new paperless system will allow us to free up resources while meeting our growth targets for the next one to two years,” he says.

Acquisitions can also help brokers in the region become more competitive through access to better technology.

Earlier this year JLT bought Dubai-based commercial lines broker Insure Direct.

Insure Direct chief executive Ken Maw says that one benefit of the acquisition is that his company now has access to JLT’s superior IT systems and resources, virtually guaranteeing that the company will be at the cutting edge. “I’m glad we are now part of a major organisation who can tackle these issues,” he says. 

But without the buying power of a rich parent, such IT upgrades are a luxury that most UAE brokers cannot afford. Indeed, Vazayil estimates that there are only 10-15 brokers in the UAE market big enough to invest in technology platforms.

“Those of us who do that definitely have a competitive edge against the small brokers who do not have the volume to do this,” he says, explaining that a software overhaul could require an outlay of $300k-500k, plus a shift culture and retraining of staff.

Yet the alternative is to persist with paper-based transactions that are not only expensive but also vulnerable to human error.

Insurance software house Ebix vice president Jeff Ward says: “Broking is a labour intensive process. It is hard work, and also gloriously inefficient.”

“The business processes adopted in Dubai and many other markets are very similar to those currently in use in London – largely manual processes to extract data from documents and put it onto computer systems.

“All parties must do this correctly or they will end up with different versions of the truth – a trail of uncertainty, data and reconciliation errors and unallocated money.”

Ward has spent the last year drumming up support for an initiative that could remove the reliance on old paper methods in the Dubai International Financial Centre (DIFC) – an electronic trading platform.  

“We’ve had a lot of discussions with brokers and underwriters in the Middle East, and Dubai in particular, to work out how more appropriate technology can be used to benefit the market,” he says.

In 2008, the Qatar Financial Centre Authority (QFCA) launched its own platform –Qatarlyst – with the same intentions, but the system never reached its potential.

Ward says one of the reasons was that Qatarlyst was misused by brokers, who exploited the opportunity to reach a wider audience of underwriters by sending spam-like quote requests across the market. But he believes that, with a stricter code of conduct and some technological checks in place, the concept still has a future in the region.

However, brokers are sceptical. “I don’t believe electronic trading will come into play for the onshore insurance ‎market, and if this has been considered, it is still a very long way away,” says Maw, while Vazayil adds: “I don’t think the UAE market is ready yet for electronic trading. The providers are still reluctant to commit themselves to that.”

Ward admits there needs to be a widespread attitude shift from brokers in Dubai in order for electronic trading to reach a critical mass. “Otherwise there is a risk that brokers and their trading partners would have to deploy resources to support two ways of doing business – the electronic way and the old manual way.”

Another concern is that the overhaul required to join an electronic utopia is another opportunity for smaller local brokers to fall by the wayside. “I don’t think it’s in anybody’s interests to let that sort of thing happen,” says Ward. “Market initiatives should be just that – initiatives for the market, not just those who can afford them.”