Inflation has had a mixed impact on the insurance industry in Egypt, said Inflation has had a mixed impact on the insurance industry in Egypt, said Egyptian Insurance Brokers Association chairman Adel Shaker.
Inflation exposes the insured to the risk of not receiving compensation equivalent to the current real value of their insured properties in the event that they do not respond to inflation by increasing the insured amounts on their assets.
Mr Shaker told Al Arabiya that the premium hikes by insurers to keep pace with inflation give an unrealistic picture of the growth rate of the insurance sector in Egypt. The hikes in premiums present an image of the sector growing at high rates.
Misr Insurance Holding Company CEO and managing director Mohamed Mahran said that the insurance industry in Egypt is affected by high inflation, but the extent of the impact varies depending on the type and nature of insurance.
Mr Mahran said that property and liability insurance is one of the branches most affected by inflation, due to its connection to assets, buildings, cars, factories, and machines, all of which increase in price. Therefore, insurance premiums need to be hiked by the same percentage of increase in the value of the assets.
Inflation and life insurance
Mr Mahran added that the life insurance branch is also affected by inflation. The value of life insurance policies would witness growth at the same rates as price increases. However, inflation is often accompanied by an increase in interest rates, and it pushes the insured towards investing in savings certificates with a high rate of return.
Sarwa Life Insurance managing director Rimah Asaad said that inflation affects insurance activity differently according to the branch. For example, medical insurance is affected by the increases in the prices of medicine and medical equipment, and premiums are raised for new medical insurance policies or on renewal.
Convincing the insured
One challenge posed by inflation is the difficulty of convincing clients of the need to revise their insured sums to keep pace with the higher value of assets.
Mr Shaker said, "Sometimes the value of assets doubles, and thus premiums increase significantly. This places a great burden on customers, especially since insurance is an intangible commodity for which the customer does not receive compensation unless the risk occurs."
He also said that owners of large projects and factories are responding to insurance companies and brokers to adjust the insured value of their assets, while insurers face difficulties with individual customers, especially car owners.
He added, “As insurance brokers, we face the burden of explaining to clients that failure to adjust the value of assets — cars, for example — exposes them to the application of the principle of proportionality.”
Egypt has been suffering from high inflation rates for many months. The annual urban inflation rate hit a record 38% in September 2023 and has declined over five months running to 25.7% in July 2024.