Navigating Insurance Challenges in Lebanon: A Strategic Roadmap

The insurance sector in Lebanon, like many of its economic facets, is navigating through a period of significant challenge and change. This crisis is rooted in political instability, economic downturns, and the aftermath of the Beirut port explosion in 2020, among other factors. These elements have collectively put unprecedented pressure on all sectors, including insurance, driving the need for strategic resilience and adaptation.

Lebanon’s insurance industry, historically robust and competitive within the region, has faced increasing pressures from several fronts. The devaluation of the Lebanese pound, hyperinflation, and the banking sector’s liquidity crisis have severely impacted the operational capabilities of insurance companies. Policyholders are finding it increasingly difficult to keep up with premium payments, while claims costs are rising due to the economic situation and inflation. Additionally, the regulatory framework and oversight of the insurance sector have been areas of concern, requiring enhancements to ensure stability and trust among policyholders.

Despite these challenges, the Lebanese insurance sector also showcases a remarkable capacity for resilience. Companies are exploring innovative strategies to navigate through the crisis, including digital transformation, product diversification, and revising pricing models to adapt to the economic context. Moreover, there’s an increasing focus on risk management and solvency to ensure long-term sustainability. This article showcases the portfolio insights of the company in the Property and Casualty department.

Balancing Premiums with Risk Exposure

Insurance is not a static field; risks evolve, and new risks emerge. Therefore, insurers must adapt by regularly reviewing their underwriting criteria, leveraging new data analytics technologies, and staying informed about changes in the environment that could affect the risk landscape. Furthermore, it’s vital for insurers to develop comprehensive risk mitigation strategies.

The emphasis on the importance of thorough underwriting before pricing an insurance policy cannot be overstated. Underwriting is the process where insurers assess and evaluate the risk associated with an insurance policy. The goal is to price the risk accurately, ensuring that premiums collected will cover the claims and the operational costs, while also allowing the insurer to make a profit.

It is observed from regional data that the volume of insurance policies and the corresponding financial outcomes vary considerably. Some areas demonstrate a higher concentration of policies, indicating a robust customer base, while financial metrics suggest that premium levels do not consistently match up with the risks incurred. This variability highlights the importance of leveraging top-notch risk mitigation methods to enhance the sustainability and financial health of insurance operations.

 

The data provides a clear view on the policies distribution within the company. The left graph, demonstrates the diversity in policy types offered, with ‘MUC’ related to all commercials type and emerging as the predominant category, accounting for nearly 6,000 policies in our portfolio. This indicates a robust demand for this particular insurance product line, suggesting that our underwriting efforts in this segment have been well-received by the market. In other hand the count of policeies issued from the head office is still significntly higehr than thos ein otehr branch suggesting taht and effort should be put to increase the roductivity there vene that during the past 5 years the policy has been increasing however the effort should be kept in order to maintain the portfolio of the company.

On the right, the second graph represent the Distribution of policies based on currency which presents a financial landscape shaped by currency dynamics, a crucial factor given Lebanon’s economic flux. The stark predominance of policies denominated nowadays is definitely the USD fresh keeping the LBP out of reach.This also reflects our strategic positioning to offer policies by providing a safeguard against hyperinflation and reinforcing the financial robustness of our portfolio.

Strategic Insurance Operations

The company expanded its presence in Lebanon over the past years, establishing multiple branches to increase its portfolio. Despite the expansion, the headquarters significantly outperformed all other branches combined over the last five years, holding approximately 78% of the total policies.

The fluctuating trends of annual endorsements from 2018 to 2023 for the ten most insured risk locations, highlights the insurance behavior post the Beirut blast with a notable peak in Achrafieh and the strategic success reflected by the rising trend in Zahle. Complementing this, This comprehensive analysis underscores the importance of accurate data management and strategic branch placement in the dynamic landscape of insurance endorsements.

The analysis of short-term insurance policies has uncovered irregularities, especially policies with a recorded duration of zero days, pointing to possible data entry errors. This issue emphasizes the critical need for system improvements to ensure data accuracy and to implement a detailed tracking feature for the reasons behind policy cancellations. Such enhancements are particularly crucial in light of a recent incident involving a disputed policy issued in September 2023, which could have led to complications in claim processing.

Strategic Data-Driven Enhancements

To navigate the complexities of the Lebanese insurance market, it’s recommended to enhance system capabilities, focus on strategic locations with high engagement potential, and continuously analyze policy data to inform decision-making. With these strategies in place, the company is poised to better manage risks, optimize its portfolio, and maintain its leadership position in Lebanon’s insurance sector. The extensive data repositories maintained by insurance companies are invaluable for Data Analysts and Data Scientists. They provide a rich foundation for constructing sophisticated predictive models and developing automated tools that enhance efficiency and streamline daily operations effectively.