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A version of this article was first published in the July/August 2024 edition of the Middle East Insurance Review.
MNK Re DIFC’s Mr Umair Ismail shares his thoughts on how the rise of AI is transforming insurance businesses in the MENA region – driving innovation, enhancing efficiency and reshaping the customer experience.
AI is set to play an essential role in not only disrupting but transforming industries across the globe. The adoption of the technology among businesses has risen dramatically this year, with the proportion of organisations globally using AI in at least one business function increasing from 55% in 2023 to 72% in 2024, having remained at around 50% for the previous six years.
When it comes to the insurance and reinsurance sectors in the MENA region, one of the biggest benefits of integrating AI into our services is that it allows insurance products to be tailored and personalised to the specific needs of the client.
Coupled with this, AI helps insurance businesses in the region to analyse real time data, ensuring that risks are managed more effectively.
This is most clearly demonstrated by looking at risks stemming from climate change – an issue that will continue to affect the region with extreme-weather events such as floods and droughts increasing with knock-on effects to major industries such as construction, a major part of the MENA economy.
The MENA region has seen a significant rise in natural disasters in recent years, with temperatures in the region increasing by 1.5 degrees Celsius over the past century, twice the global rise of 0.7 degrees Celsius.
Combined with this, precipitation levels are expected to continue to rise with studies revealing that the Middle East may experience a 30% increase in annual rainfall this century.
When it comes to climate risk, parametric insurance enhanced by AI technology offers a big opportunity. These solutions use AI to process and analyse historical data, climate models and satellite imagery to predict the likelihood and seriousness of extreme weather events in specific areas in the MENA.
This has allowed insurance products to be tailored to the specific needs of communities across the region vulnerable to the impacts of climate change.
Parametric solutions also use AI automatically to trigger payouts based on pre-defined parameters based on the climate. The payout can therefore be with the client almost straight away, ensuring that they receive their compensation as quickly as possible.
The recent devastating floods in Dubai, which caused widespread damage to a variety of properties, were a reminder of the importance of parametric solutions and AI in supporting individuals and businesses when extreme weather events take place.
Alongside climate risks, MENA has seen a rapid rise in construction risks over the last few decades. In Q1 of 2024, it was estimated that the construction projects market was worth $590bn or 15% share of the MENA’s total pipeline value of $3.9tn.
Whether it be Saudia Arabia’s mega project, Neom, or the UAE’s major Etihad Rail Project, insurance businesses have started to use AI to maximise protection from the risks involved in construction.
The impact of AI technology on construction insurance has been enhanced by combining the technology with the internet of things (IoT), referring to the transfer of data between multiple devices over the internet.
The revenue in the IoT market is projected to reach $30.6bn in 2024 in the MENA, with an annual growth rate of 10.21% from 2024 to 2029.
For example, some companies in the region have placed IoT sensors on machinery to track their operational status whilst AI has been used to analyse this data to project when the equipment is likely to stop working.
Furthermore, IoT sensors have been added to drones to take part in surveillant construction sites.
AI breaks down this data to highlight potential risks, track progress and analyse the conditions of the construction site. This is being used in a variety of construction projects in the region, to ensure more accurate risk assessment.
Construction workers can even use IoT wearable devices that can be embedded in clothing which include smart shoes, wristbands or helmets. These track a variety of data relating to health, location and work and productivity.
AI is used to analyse this information to detect any tiredness or exhaustion, triggering alerts to their managers if a worker is showing these signs. This is likely to decrease the chance of injuries and mitigate these types of risks.
With the average annual growth rate of more than 3% expected in the UAE construction sector between 2024 and 2027, the importance of using AI to minimise risk is bound to increase.
Whilst AI is set to enhance the services that the insurance sector provides, it is essential that governments have policies in place that allow these businesses to exploit AI and easily integrate the technology into their services.
When it comes to the AI readiness of governments in the MENA, the UAE is in the lead- ranked 18th worldwide in 2023. This is unsurprising given the important foundations the country has set to ensure it is prepared for this technology.
This includes not only releasing an AI strategy but appointing Mr Omar Al Olama as minister of state for the digital economy, AI and remote working system in 2017- the first country in the world to have a minister specifically responsible for AI.
The country’s strategy for AI aims to achieve the objectives of UAE Centennial 2071 – boost government performance at all levels and make the UAE the first in the field of AI investments in a variety of sectors.
There is a particular focus on education, with the UAE National Program for Artificial Intelligence partnering with the University of Birmingham in the UK to implement a programme aimed at providing UAE officials with the understanding and skills to become AI experts.
Domestically, they have also invested heavily in educating young people with the Mohamed bin Zayed University of Artificial Intelligence – a graduate research university dedicated to advancing AI.
Other countries in the region have followed, with Egypt adopting its AI strategy in 2019 and both Qatar and Saudia Arabia releasing their strategies in 2021.
Saudi Arabia is now planning to create a $40bn fund to invest in AI, to support a variety of tech start-ups.
Furthermore, Bahrain has focused on improving their data and infrastructure foundations, releasing its sixth National Telecommunications Plan, which outlines how the government will create resilient infrastructure to effectively implement technologies like AI.
The steps taken by the insurance sector in the MENA to integrate AI into its services are playing an important role in mitigating risks more effectively.
Whilst the growing need to use AI to help with managing climate and construction risks is clear, AI will be pivotal across all sectors for insurance businesses, ensuring that they enhance their offer to clients.
Collaboration with technology and InsurTech firms will only increase, reflected by the recent MENA Insurtech Summit in Qatar, which brought together top (re)insurance leaders, startups, insurers and InsurTechs from across the region.
Technological advancements within the insurance sector must also be coupled with action from the MENA governments, continuing investment in AI education, partnering with research and academic institutions and implementing the necessary enabling regulation.
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You can read the original article on the Middle East Insurance Review website