Higher Costs, High Competition

Despite his young career, George Abraham Matossian recorded big strides in his remarkable achievements, talent and work ethics.

George Matossian’s target is to expand Al Mashrek to important markets, where he can use his knowledge and experience for the benefit of the industry. He is also determined to go on with plans in a timely fashion and in a conservative manner.

Besides talent and work ethics, a key factor to Matossian's accomplishment has been his durability throughout his young career.

George Matossian has long been recognized for his leadership and advocacy of the insurance industry as he accompanied his famed father Abraham Matossian in the last 10 years. He is keen to see remarkable changes happening in the Lebanese insurance industry through the involvement of the Commission for the Control of Insurance Companies at the Ministry of Economy. In addition to serving as General Manager & Vice President of Al Mashrek insurance & reinsurance, George Matossian is heavily involved in the advancement of ACAL and the insurance sector.

BL: George, insurers must examine and review their risk management procedures, what risks should be considered in Lebanon and the MENA region?

George Matossian: When you talk about risk management, it may apply to foreign countries but I believe that in our market, we try to cope with the trend that we have. We still don’t have the possibility to use all the tools of risk management because our market doesn’t provide us with accurate information and data. It will take time as it is a small market, it’s quite difficult to reach the achievements of the European markets which we always strive to compare ourselves to.

BL: What is the role of insurance supervision and control bodies in organizing insurance markets in Lebanon and the GCC? Are you satisfied with the existing system?

George Matossian: Basically, the supervisory authority is one of the most important bodies to keep the insurance industry going on, it’s the fuel of the insurance industry. But of course, too much regulation is not healthy especially in our markets where we do not have political stability. Consequently, it is not possible to impose a lot of regulations on companies that are pushing hard to survive. I will talk about Lebanon because GCC and other countries are not in the scope of the presence of Al Mashrek Insurance & reinsurance Company but we can look at certain countries just to compare. For instance, when the Saudi Arabian Monetary Agency (SAMA) imposed extremely tough regulations, we saw that as years pass by too much regulations is bad for the industry though I provides security for the end user but it’s quite bad for the industry's continuity and growth. In Lebanon, we have been trying to implement some changes and we requested the governmental body to have a representative named by insurance companies in the insurance supervisory authority and to have a group of supervisors rather than just one person, because we believe that when there is one person in charge, this person might be ethical and he might be the contrary depending on his character and his professionalism. Lebanon has 3 heads of state: the President, Prime Minister and the Speaker of the Parliament of Lebanon where the President is the final decision maker, we should have the same approach in governing the insurance industry where there should be three persons in charge who report to the minister and the final decision is for the minister. Basically, with the changes that we had lately and the assignment of a new controlling supervisor we are hoping to see the difference that we have been asking for since years.

BL: What are the required changes that should be implemented immediately in the region in order to meet customers' satisfaction?

George Matossian: Customer satisfaction is linked to several aspects. In my opinion, some companies in Lebanon need to merge and form a stronger entity. This merger will automatically be the backbone protection for their clients. We cannot be very tough with regulations but we have to be fair so that medium to small companies survive and be able to pay claims and this will automatically protect the customers' satisfaction. Another aspect is Controls and Fraud Prevention because fraudulent customers will encourage insurance companies to be tougher with their own existing good customers and have doubts but as long as the government entities are not fully implementing their responsibilities then our job is becoming much harder. Therefore, we call for a whole clean up of the country and the industry because we are all linked together. It’s a chain reaction.

BL: What are the limitation of insurance companies in Lebanon?

George Matossian: Lebanon is a small market that has many insurance companies. It’s true that we are all working professionally but our resources are limited because of the size of our country and the political instability which hinders the growth of any industry.

BL: Do we need more regulations in Lebanon?

George Matossian: Yes, we need more regulations. It is very important to regulate the brokers in Lebanon. Brokers are not regulated, thus any person can become a broker in Lebanon or an agent and it is unfair to the companies and entities that are registered officially with the ministry and have paid up capital. Consequently, the insurance company and the end user will be affected from such process. We created a professional liability insurance pool to cover the broker syndicate in Lebanon. I believe all brokers should register in the syndicate which will automatically give them the right to have the professional liability cover which translates to the protection of their customers' benefits, this is part of the regulations that should be imposed. Liban Post has lots of branches in Lebanon that sell insurance policies to end users without having the proper license to market insurance products in so many branches. By law, they should register each and every person in each branch that is selling these policies to the end users and their staff should be qualified to sell insurance products.

These are the main issues that we wish regulators to consider as a start, other requests will come in due course.

BL: What are the Corrective actions that the control authorities should implement immediately in order to correct the insurance markets?

George Matossian: This is one of the important aspects that the control authorities should look into; bancassurance, we are in need of a new law desperately. All insurance companies in Lebanon are stable as long as the Commission for the Control of Insurance Companies at the Ministry of Economy is regulating them and therefore banks should accept all the policies issued by any insurance company for their clients. The solution is to have a controlling body that will deal with the conflicts between banks and insurance companies. This would be a good start up to constitute a controlling body composed of insurers and bankers, which will protect the interest of both entities.

BL: How to eliminate bureaucracy and corruption in Lebanon which is delaying the growth of the financial sector? In what ways is it affecting your company's growth in Lebanon and in Egypt?

George Matossian: Bureaucracy exists all around the world. It’s true that it’s quite more corrupted in Lebanon and Egypt than in US and Europe. Bureaucracy and corruption exist in almost every country in the world. I believe the only solution is to hand over the governance to the army for a limited period of time. The army is the only governing body that has maintained its reputation and dignity and doesn’t have lots of corruption. The army should have a task of cleaning up and working in parallel with a new governing body that is well controlled and willing to achieve growth and facilitate the process. It’s a big and difficult task, it’s a dream.

BL: What are your expectations from ACAL's new president Max Zaccar?

George Matossian: First of all,  Max Zaccar was an old friend of my late father and his son is an old friend of mine. I respect him because he is highly educated and has been in this industry for many years and also he has the technical and market know how. He has been Chairman of the Marine Committee of the Association of Insurance Companies in Lebanon (ACAL) since 1978; a member of the Cargo Committee of the International Union of Marine Insurance (IUMI) since 2002; and IUMI Special Envoy to the Middle East since 2009 and now has been elected as the new President of ACAL for only one year, which I don’t believe is enough time to complete achievements, however it would be enough to start working on new beneficial projects for the insurance industry or at least to continue one of the main projects that were discussed in the past years that are affecting our insurance industry and to continue and finalize previously suggested and partly implemented projects.

BL: How do you see health insurers in Lebanon?

George Matossian: Our market and health insurance are going to be in danger with all the additional health expenses that are being imposed by many hospitals. This will deal a direct blow to our wallets and to the Lebanese economy. It is quite hard to increase our premiums due to the prevailing unfair competition and the limited purchasing power of clients. We are facing every six months an increase in the hospitalization fees and additionally there is a big crookery going on in the hospitalization sector. Unfortunately, some doctors who are considered humanitarians have become in my opinion traders who do not miss a single profit opportunity and this is all taken from insurers pockets. Hospitals claims used to cost few hundred dollars in the past but now the cost is in thousand dollars just because some doctors refuse to use the old technology and stress on using the newest technology which is very expensive noting that in some cases the old technology works fine. Thus, it’s becoming more of a marketing business than hospitalization. This situation impacts our premiums and eventually we cannot continue working without updating our premiums respectively which in turn is already hard to implement due to the present harsh economic situation. I hope that insurers get together and discuss these matters which affect us all, and instead of stabbing each other in the back we should join forces to stabilize the situation respecting the benefit of all parties. This issue is impacting both the insurers and the reinsurers. We might reach a day when the reinsurers will refuse to cover medical business.

BL: What about motor insurance?

George Matossian: There is the new traffic law in the motor insurance. We started seeing some change in the big claims which are diminishing slowly or at least diminishing loss of life, but it will take time to implement the new traffic law. It’s a positive way to start somewhere and I believe that ACAL should have a big role in supporting the new law because at the end of the day this will influence our motor claims loss ratios and it will also affect positively on the Ministry of Health regarding the uninsured persons and also  in hit and run cases. People complain that the new laws are quite tough and the fines are very high but if people cannot afford to pay the fine then they should obey the law.

BL: In a country without a president and a functioning government, how do Lebanese insurance companies survive and how far are they affected by such unhealthy environment? Is it one of the causes that pushed many Lebanese insurers to expand into the GCC and the MENA markets?

George Matossian: Of course, the appointment of a president and the availability of a government affects us, we cannot have any changes or achievements because every new law needs a government to pass it. People are stressed and scared and this distresses the economy. People are scared to use their savings and as such we are having a tough time collecting our premiums, bearing in mind that on the other hand, we have to pay our claims noting that in some cases our regulators are getting involved and in obliging insurance companies to pay claims. I believe that when an insurance company does not receive its premium in 90 days the cover should be dropped but unfortunately the Lebanese law protects the client in this matter which makes it hard to cancel an insurance policy.

BL: How was the performance of AL MASHREK insurance & reinsurance during the first six months of 2015?

George Matossian: We have no growth for the first six months of 2015, we are trying to keep our existing portfolio and waiting to have a solution to the political dilemma, it’s all linked with the political situation in the country. When there is a political stability, we will look for growth, we will be able to come up with new products, new laws, new improvements. But as long as we are in a frozen country, I believe it’s an achievement to keep what you already have.

BL: Do you see any light in the horizon?

George Matossian: We always hope for the best, if we don’t have a positive outlook we would probably just leave the country and look for some opportunity where we can have future. But we always have a hope in Lebanon and throughout history we have had the same situations over and over again. Lebanon survives critical situations smoothly but we just hope that it doesn’t last much longer.

Well, Lebanon is my country, I hold the Lebanese passport, and I don’t have any other nationality.

BL: What are your expectations from United General Insurance Company-Egypt?

George Matossian: Finally, we started our operations in Egypt and of course United General Insurance Company-Egypt is a new company challenging a tough and competitive market. We are looking to find new customers and not existing insured customers. We want to raise insurance awareness  and in a way raise the quality of insurance products and not prey on the existing companies portfolios.

we are looking for a long term presence and small growth. We are a conservative company and we are hoping to be an added value to the market. Egypt is a big potential market with around 34 insurance companies and a lot of uninsured clients which we see as potential future clients. United General Insurance Company is a brand new small company but  we could be leaders in awareness and we could share business with other insurance companies in Egypt.

BL: Despite regional conflict, Lebanon is planning to become a railway powerhouse once again, do you think this will happen? How does it reflect on insurers?

George Matossian: I heard on the news that some ministers and deputies are proposing the revival of the railway stations in Lebanon as it’s part of our Lebanese heritage plus it is a good way to lower the traffic jams in Lebanon and higher costs of living. Train systems also reduce the dependence on oil. I believe it would be a positive issue to have the railway back on track in Lebanon. Service cars and taxis will be losing customers but it’s time saving and money saving and much safer than driving.

It will impact insurers who will have more business from Syria and Iraq. Syria is our door to Jordan and the Arab countries and this door has been closed for almost four years and this is affecting the marine business in Lebanon. When the situation in Syria improves this will be reflected positively in the marine and engineering business because Syria needs to be  rebuilt and Lebanese and Syrians have always worked together.

BL: How would insurers benefit from Lebanon's oil and gas?

George Matossian: Everybody has high hopes for winning business from this sector but I would say to all to look at what they have already in their pockets before looking into something that is still extremely vague.  We do not have yet a solid business plan as to when we will be able to extract Lebanon's oil and gas.

Lebanese insurers are urged to diversify their offerings for oil and gas sector. The insurance sector needs to acquire new tools that would allow it to provide services for such huge projects.

We request the Lebanese government to protect our interest and support the industry by implementing a new law that obliges oil companies to issue a policy in Lebanon.

BL: George Abraham Matossian, What are your plans for The General Arab Insurance Federation (GAIF) May 2016, Lebanon?

George Matossian: The General Arab Insurance Federation (GAIF) May 2016 will be held in Beirut. We started working on the preparations but it is quite tough because we are facing some political issues especially that a lot of the GCC countries are banned from coming to Lebanon and we are hoping by next year the ban will be lifted especially that Lebanon is a touristic destination.

This is a big challenge for Lebanon and we are working on having it succeed.

I was unofficially appointed as the head of the organizing committee and we are still trying to find the suitable venue. Unfortunately, if we are expecting around 2000 participants then Phoenicia Hotel cannot accommodate 2000 persons.

There is a very nice surprise and new trend for Lebanon's GAIF- May 2016.