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According to interviews conducted by “This is Beirut” with several insurers, Lebanon’s insurance sector has been on a slow path to recovery since the beginning of the year. However, it still lags far behind the levels seen in 2019.
The supply and demand dynamics within Lebanon’s insurance industry have witnessed significant transformations, reflecting a nation grappling with a crisis where the state has relinquished its responsibilities, and its institutions stand idle.
Both insurers and policyholders have had to adapt to a new social reality characterized by uncontrollable inflation and unprecedented levels of poverty. Many insurance policies, spanning various branches of the industry, now offer premium payments on a monthly, quarterly, or semi-annual basis, with no additional fees during these challenging times. This concession by insurers ultimately benefits all parties involved in the insurance contract.
In an interview with “This is Beirut,” Assaad Mirza, Chairman of the Association of Insurance Companies of Lebanon (ACAL), highlights that as a general practice, policyholders who are former customers of the company are covered from the first premium payment. For new customers, insurers grant a three-month window, starting from the initial monthly payment, to provide coverage for claims, regardless of their nature.
It’s crucial to note that in Lebanon’s highly dollarized economy, all insurance policies across the board are exclusively issued in fresh dollars, either in cash or through international credit or debit cards. This practice has been in effect since 2022.
A necessity
Both large corporations and small-to-medium-sized enterprises have upheld their insurance policies covering “material losses,” a term encompassing all “non-life losses.” Assaad Mirza considers this a prudent response, given the substantial risks and multifaceted threats faced by Lebanon’s business landscape amid the ongoing crisis that has plagued the country since 2019.
In the realm of health insurance, obtaining coverage has become a necessity due to the collapse of the National Social Security Fund (NSSF) and the effective disappearance of the basic health insurance scheme known in Lebanon as the third-class insurance policy. An anonymous insurer emphasized, “It’s a matter of life and death,” stressing that gaining admission to a hospital in Lebanon has become nearly impossible without private insurance.
Second-class services
A significant portion of customers is now opting for cost-effective options like limited medical coverage, referred to in Lebanon as second-class health insurance policies, rather than first-class health insurance policies. A similar trend is observed in motor insurance, where a considerable number of individuals prefer third-party car insurance policies, a form of minimum coverage, over all-risk insurance. It’s important to note that mandatory motor insurance, which offers affordable premiums for the average citizen, provides coverage for bodily injury to third parties.
An increase of 11% to 12%
The soaring inflation rate will impact insurance premiums in general, with a particular effect on health insurance premiums. ACAL’s Chairman foresees a significant increase in these premiums, expected to be around 11% to 12% in 2024. “It’s an irreversible hike that will strain policyholders’ finances, but it results from an agreement between ACAL and the medical association, ensuring a 100% reimbursement of medical consultations starting on January 1, 2024.” Until the end of 2023, consultations will be reimbursed at 85% in fresh dollars, compared to the prior rate of 75% until August 2023. It’s also essential to consider the rising costs of hospital services.
Stagnation in the life insurance sector
When questioned about the life insurance sector, Assaad Mirza highlights that this sector is in the doldrums due to the fact that banks have stopped granting consumer loans in general, and housing loans in particular. The same situation applies to savings plans, commonly known as pension-retirement insurance policies. Since the crisis began at the end of 2019, insurance companies have refrained from offering financial products. In fact, the Ministry of the Economy, which oversees insurance companies, is actively working on a single settlement to the dispute between subscribers of savings and pension plans and insurers. This dispute revolves around the portion of reimbursements to be made in fresh dollars. Until a unified resolution is approved by the Ministry of the Economy, it has ordered the suspension of any closures of this type of insurance policy.
With growth forecasts of between 5% and 7% for 2023, the insurance industry seems to be weathering the Lebanese crisis with as little collateral damage as possible.
