Insurance and health care touch the lives of nearly everyone in the globe at some point. Whether you obtain medical insurance through your employer, seek consultation with a doctor about an illness, fill a prescription at the pharmacy, take a day of sick leave from work
—or just wonder how you will pay for it all—almost everyone rubs elbows with the insurance and health care system.
Today, AL MASHREK is led by the two brothers from the same remarkable family: Alexandre Matossian, who serves as Chairman of the Board & CEO of AL MASHREK insurance & reinsurance Group, and George Matossian, General Manager – Vice President of AL MASHREK Insurance & Reinsurance Group. With their shared vision and oversight, the Matossian brothers are able to steer a course that is true to Abraham Matossian's heritage and business plan and at the same time they are breaking new ground in the 21st Century. Alex and George shed some light on what is happening in this dynamic and interesting field. The Matossian group believes that its core business is to contribute in improving people’s quality of life by providing highly efficient risk transfer mechanisms at equitable cost.
BL: Alexandre, how do we make sense of health insurance, which is not exactly the easiest task to tackle in Lebanon?
A. Matossian: Health insurance has had many changes in the last years partially due to unexpectedly high Medicare expenditures, rapid inflation in the economy, expansion of hospital expenses and profits, and changes in medical care including greater use of technology, medications, and conservative approaches to treatment and at the same time due to competition as most of the companies are competing and trying to either lower their rates or give benefits that are out of this world. Health care costs rise at double the rate of inflation. There are growing complaints by insurance companies that the traditional fee-for-service method of payment to doctors is being exploited. Expansion of managed care helps to moderate increases in health care costs. We’re trying to cope with the market as much as we can, but we’re not here to commit suicide. I think the market will stabilize but it needs time. The company still didn’t feel the effect of the inflation because we feel the inflation after two or three semesters. Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Hopefully, insurance companies will recalculate their risks and this portion of insurance will be basically reviewed so that we do not have extreme loss ratios. Plus, we have another problem: it’s the contracts that we do with the hospitals; if we as insurers unite as one vote, it would be very helpful, but unfortunately we don’t bearing in mind that we pay huge sums to hospitals every year, and I believe we are one of the highest source of income for hospitals. Accordingly, we will wait and see how the inflation will affect us in a couple of months.
Having said the above, AL MASHREK has increased its rates on the medical section because hospitals increased their rates. Of course, the rates of hospitals, doctors, medications are increasing so we have to follow suit.
BL: What’s the percentage of medical insurance in your company?
G. Matossian: It’s around 20% of our portfolio.
BL: What is the best guidance that a policy seeker can find in Lebanon and abroad?
A. Matossian: I prefer to talk about Lebanon; abroad is a different world. In Lebanon, the best guidance is the good consultant that offers you guidance and advice. Consultants know well the market and the companies too. They know which companies are well-reinsured and pay their claims promptly and they do not play around when there is a claim or try to get out of it and go to court to delay the payment as much as possible. Some consultants think all policies are the same and try to include very weird coverages and policies that don’t match, such consultants damage the market and tend on starting a new trend but unfortunately there are some companies that are catering their needs instead of stopping them. Another good guidance should be basically claims payment. How do I test the company? I test the company from the way it provides service, and the least I can do is to buy a motor insurance and from my motor insurance I can check how they will treat me. If the company treats me quiet well as a small client, I guess a big client will be treated at least the same or better, although I believe that all clients should be treated on the same basis.
BL: What’s the percentage of motor insurance in your portfolio?
G. Matossian: AL MASHREK Insurance & Reinsurance Company has 45% of its portfolio in motor insurance. In fact, it’s quite a lot. I’m trying to lower this percentage in the coming year. The opportunity arrived and I had to take it and it’s mostly due to the deals I made with some banks, but it’s not losing and it’s not profitable, but it’s risky.
BL: What trade-offs can we think of to squeeze the policies into the affordability zone?
A. Matossian: This is the first time I hear that the rates of insurance policies are expensive in Lebanon. If we compare our rates to the European or American markets then it will be a different story. Our policy rates are less than the European policies by almost 50%. Some people might comment that Europeans get paid much more than in Lebanon on their wages, but it’s not true. They get paid much more but eventually they pay taxes much more than we do plus their cost of living is extremely higher than in Lebanon and in Lebanon almost everyone is managing his own financial matters wisely. Most Lebanese are managing their life well because they have the support of their families but in Europe you do not find it.
Year-on-year, the insurance premiums are getting lower due to competition. Now, we do not want to compare our market to the Arab markets; it’s true the insurance rates in the Arab countries are cheaper than Lebanon in some policies, but the volume in the Arab countries is not the same as the volume in Lebanon. Additionally, the Arab countries have many policies that are compulsory which we do not have here and we do not have the control of the government because nobody is checking. A lot of people in Lebanon until now do not have the motor bodily injury insurance, this is the smallest policy that I can think of so I cannot compare the Lebanese market to any other market because the Lebanese market is a special market, it’s an extremely complicated market and we’re trying to cope with it as much as we can. We cannot lower the rates because the losses we have are extreme.
BL: Tell me George, what is so complicated about the Lebanese market?
G. Matossian: What makes it complicated is that we do not have a controlling body; the government is not helping to regulate and support the insurance companies although the growing links between the insurance and other players in the financial sector emphasize the important role of insurance companies in economic growth. Plus the mutual fund groups are doing medical insurance haphazardly. In Lebanon, we have the mutual fund which is unfortunately linked to the ministry of agriculture and they can sell insurance policies to anyone they want. It’s true that at the beginning it was made to cover farmers because they have limited income but nobody is controlling this issue. It’s a chaos, so every time anything happens, the first thing people do is blame the insurance companies calling us thieves and that we do not pay claims and after investigating you find that the problem is linked to a mutual fund. So this is one part of the complications that we face and it’s an extreme case. It’s a heavy burden on the insurance company to compete with a mutual fund that doesn’t pay taxes and doesn’t pay stamped duties, there’s a difference of 11% which is the regular tax. To start up, there’s a difference of 11% and there’s no control if they are properly serving their clients, nobody has the authority to check on what they are doing with the funds. Lately, they’re also getting involved in motor insurance and other types of insurance. They’re free to do whatever they want because it is out of the control of the ministry of finance and this matter is affecting the insurance companies badly.
BL: What’s the solution?
G. Matossian: we as Lebanese have always had high hopes, thus we wait and hope that somke day the insurance sector will be properly regulated.
BL: Do the networks have enough doctors and hospitals in Lebanon?
A. Matossian: For Lebanon, I believe we have more than enough, maybe in some territories like the Bikaa, Zahle and the mountain regions, there is scarcity, but Lebanon is a small country and I’m sure they can move anybody to the closest point and probably it will take them maximum 15 minutes to get to a good hospital.
BL: Georges, How serious is the region about outreach and insurance education?
G. Matossian: I believe the region needs at least ten more years to be insurance educated. In Lebanon, we have around 60% - 70% Muslims and the rest are Christians and Druze. In the Muslim belief, insurance is forbidden, so that’s why they came up with a concept called Takaful. Half of this percentage is 35% that are anti-insurance, and then the rest is at least 35% who do not believe in insurance because some people believe that they’re paying insurance and they’re not getting benefit in return. People don’t think that using the policy concerns their health, and they don’t also take into consideration that if they get one of the extreme sicknesses then the cost of going into hospital and getting treatment is extremely high and might be more than twenty times what they pay per year. Therefore, it is quite difficult to educate people because everyone has his own-mind; I believe people do not run for insurance unless they fall sick. We tried to hold several campaigns with The Association of Lebanese Insurance Companies (ACAL) but I didn’t see any tangible benefit. A lot of help is coming from the compulsory insurance. Furthermore, the foreign labor insurance is helpful and the bank involvement in insurance is also helpful because banks oblige its clients to have insurance when they require a loan and a lot of people would have learnt that insurance is supporting them whenever they have for instance, bankruptcy or any claim, they know that the insurance company is covering their losses. There is also a special focus on the issue of the insurance of medical errors after they were much highlighted in the media, thus calling for the compulsory insurance of doctors and other medical professionals. Hence, I believe claims are the only good example to educate people.
BL: Alexandre, what are your goals and what’s your vision of the group's future?
A. Matossian: The key to achieving our goals is to take control of our future. Currently, we invested in a new company called United General Insurance Company in Egypt which will be managed by Al Mashrek and we’re working hard to make it a profitable venture. Additionally, we’re basically expanding a bit abroad. Another expansion is in Erbil, Iraq, we are working to get the license there. The investment we are doing in Erbil is quite big and for the time being it will be enough. The required capital in Erbil is US$ twenty million to get a license, in Bagdad it’s around US$ two million. When we get a license in Erbil we can work all over Iraq easily.
We’ve had several other expansion opportunities but we prefer to go up the ladder slowly, but surely.
BL: Let’s talk about Lebanon, how many branches does Al-Mashrek have in Lebanon? What is the number of its team and who are its shareholders?
G. Matossian: We have thirteen branches in Lebanon and we are looking to expand even much more, but now the situation in the north is not helping, however we will for sure target new areas.
We have 120 employees and we are continuously looking for fresh talents.
AL MASHREK Insurance & Reinsurance Group is mainly owned by the Matossian family.
BL: Alex, what’s the rank of Al Mashrek amongst the rest of the Lebanese companies? What are your comments on ACAL?
A. Matossian: At the moment, we’re at number 9 in non-life, we’re far down in life, but I’m trying to push forward in life because it’s the most profitable line of insurance.
I think that The Association of Lebanese Insurance Companies (ACAL) represents the whole market and it’s doing its best to cater the needs of this sector. ACAL is facing tough times due to the lack of income, as it is known one of the incomes the association had was from the Carte Orange insurance, and due to the situation in Syria and the decrease of number of cross border motor activity, this income became almost nil. I suggest that the association should find other ways to generate income mainly from conferences and paid seminars which will help it survive in these tough times.
