Published on: 3/06/2024
The insurance sector has recorded declines of 25 percent in sales of non-life insurance premiums and 43.7 percent in sales of life insurance policies since 2019.
BEIRUT – “Since the onset of the economic crisis, my phone hasn't stopped ringing,” lamented Dr. Layale*, the medical controller of two public hospitals run by the Ministry of Public Health (MOPH). She is in charge of a special MOPH monthly fund that covers the medical expenses of patients who don’t have private insurance or National Social Security Fund (NSSF) benefits and meet specific requirements. Before the crisis, around one hundred patients sought hospital admissions under MOPH funds, but today this number has more than doubled, as many can no longer afford private insurance, Dr. Layale says.
Caught between the decline of their purchasing power due to the crisis and the fact that their assets have been frozen in banks since the start of the crisis in 2019, some cash-strapped Lebanese citizens have been forced to cut back on spending, particularly on insurance.
For professionals in Lebanon’s insurance sector, the situation is stark. According to L’Orient Today’s calculations based on figures from the Association of Insurance Companies in Lebanon (ACAL), the sector has recorded losses of around $950 million between 2019 and 2023.
“Customers have become more aware and cautious of the financial choices they are making and are therefore looking for more affordable alternatives when it comes to buying insurance policies,” said Pierre Pharaon, General Manager of the Libano-Suisse insurance company.
The same was echoed by Roger Zaccar, Managing Director of Commercial Insurance, whose premium packages are partly sold through its mobile application Comin. “Before 2019, every time you took out a loan – whether to buy a car or a house – the banks made it mandatory for you to purchase an all-risk car insurance, or property insurance alongside your loan. But when the banking sector collapsed and stopped giving out loans, all these insurance purchases stopped," he explained.
Life insurance vs. non-life insurance
ACAL told L'Orient Today that the sector suffered a 25 percent drop in non-life insurance premium package sales between the end of 2019 and 2023. While the different types of insurance packages falling into this category (medical, motor, fire and marine insurance) have been affected differently by the economic collapse, the association's president, Assaad Mirza, says that all contract renewals are down (although he was unable to give specific figures for each type, with the exception of medical insurance, where sales have fallen by 20-25 percent).
According to Mirza, this represents a loss of $600 million in the non-life insurance market over this period, not to mention the $1.2 billion in assets that remain trapped in banks (i.e. 64 percent of the sector’s overall invested assets) to which insurance companies have no immediate access.
Meanwhile, as far as life insurance contracts are concerned, the latest ACAL figures show that the number of premiums sold fell from 350,000 at the end of September 2019 to 197,000 at the end of May 2022, a drop of 43.7 percent, resulting in losses of around $350 million. For Pharaon, banks were the main distribution network for life, auto and property insurance and disruptions across the banking sector caused “the loss of a major network,” sharply reducing sales.
Life insurance policies, sold in the form of savings plans, are taken out for a variety of reasons, whether to save for retirement, for children's education, or to provide families with a safety net in the event of the insured person's unexpected death.
“Saving plans were another insurance product that was hit hard and Lebanon was big on those. But since the crisis happened, insurance companies, like everyone else, have had their money blocked in Lebanese banks,” said Zaccar. As a result, Lebanese customers became reluctant to pay monthly premiums, losing trust in insurance companies and their ability to pay back funds.
Medical and property insurance
While all insurance types have been affected by the crisis, they have been affected differently. The Lebanese Lira began to depreciate in 2019, but “it wasn't until 2021 that insurance companies began to collect part of their premiums in fresh dollars,” said Pharaon, referring to dollars that are not subject to the illegal restrictions put in place by banks since the start of the crisis, and which were difficult to come by.
“Many people were forced to forgo or downgrade their medical insurance (i.e. switch from class A to class B) because they could no longer afford it,” explained Mirza.
“The main difference between Class A and Class B medical insurance is limited to the number of beds in the same room during hospitalization – one bed in a room for Class A versus two beds in a room for Class B. But both categories provide essentially the same medical benefits, except that patients in Class A enjoy additional comfort and privacy,” added Pharaon.
But while overall sales in the sector have fallen, certain “side” effects of the economic crisis have paradoxically mitigated this fall for some insurance companies.
When the National Social Security Fund (NSSF) could no longer carry out its duties during the crisis, sales of private medical insurance rose, explained Zaccar and Pharaon.
“In the absence of government social safety nets and given the paralysis of public institutions, insurance products have acted as a lifeline, or shield, for some Lebanese people over the past five years and the insurance market has filled an important gap for these customers,” emphasized Pharaon.
Another type of insurance also experienced an unexpected rise. Without providing exact figures, Zaccar told L’Orient Today that in the aftermath of the Beirut Port explosion and the multiple earthquakes that hit Lebanon over the past three years, “sales of home insurance policies have also increased, as people – or at least those who can afford it – have become aware of the importance of home insurance [ which is not mandatory in Lebanon].”
Source: L’Orient-Le Jour