AL MASHREK insurance & reinsurance SAL is well known as one of the leading insurance companies in the Levant and North Africa for its presence and service for the past 39 years; it made many more achievements by expanding its presence to important destinations such as Egypt.
While lack of coverage is the region’s challenge, experts should compare patterns of those without insurance with factors like ethnicity and income hints.
Besides talent and work ethics, a key factor to Georges Abraham Matossian's accomplishment has been his durability throughout his career.
After his education in the United States, Georges Matossian has long been recognized for his leadership and advocacy as he accompanied his famed father Abraham Matossian. Since his return from the United States, he has seen many changes and witnessed remarkable fluctuations in the insurance industry. In addition to serving as General Manager & Vice President of Al Mashrek insurance & reinsurance SAL, Georges Matossian is well known throughout the country as an enterprising business man.
Al Mashrek is more than a business venture; it is a continuation of a success story.
Following more than 15 years of insurance experience, 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.
“Being an insurer is not enough. Working to preserve the ideals of our profession, the opportunity for growth, the use of transparency to inform and enlighten clients in all ways, and serving clients when there is a claim are the most important contributions we can make as insurers. Our knowledge and judgment, honed with experience, continue to provide invaluable resources in a vast array of business lines.
BL: What are the updates on Al Mashrek and what are the plans for 2020?
Georges Matossian: Al Mashrek is still on a stable journey, bearing in mind that the current market situation is quite challenging with lots of fair and unfair competition. We are struggling with what is available to surpass this period that the market has been facing for the past three years and we are expecting a prosperous future for the Lebanese market by finding new opportunities to grow its insurance portfolio. However, we're still working on perfecting that blend, but I think we're getting pretty good at it and we try to stress on acquiring profitable and stable lines of insurance.
Knowing that oil and gas is coming and reconstruction of both Lebanon and Syria is on the way. So this is the positive outlook that we are looking for.
For 2020, we are hoping that the crisis or war in Syria will be over and our monetary and political situation in Lebanon will ease so that the newly elected government could review our part pre historic laws and apply the needed changes to cope with the updated international market standards.
BL: Are you satisfied with the current status of the insurance industry in Lebanon and what are your complaints and suggestions?
Georges Matossian: The insurance industry is always on a growing path but at a very slow pace, due to the lack of awareness and uncontrollable competition in comparison to a normal and stable market.
As for the challenges, we have many, mutual fund companies are the biggest issue we are dealing with noting that they are competing with the insurance industry on all lines of business and especially in medical, without any reserve or tax liability.
Throughout the years, their medical portfolio has grown to reach the size of insurance companies’ portfolio. It is unbelievable that nobody is able to either impose regulation or tax on them.
It is very dangerous to have a mutual insurance policy in Lebanon where the security is neither controlled nor guaranteed by any third party or governmental entity. It allows a big opportunity for fraud and theft. Although it may not be happening today but it’s just a matter of time. Another issue is the new traffic law that was implemented in 1/1/2018, which included the compulsory motor insurance for the third party material damage. Whereas we have reached an agreement to attach both compulsory policies “bodily injury and material damage” to form a single compulsory third party motor policy, thus we discussed this issue with the Ministry of Economy and the ICC “Insurance Control Commission” who also in their turn reviewed the project with the world bank to know what would be the suitable/acceptable premium for the combined policy. And till today, we have not reached a final decision yet, basically, due to the financial situation of the people and the policy buyers.
We are working at the same time on implementing a universal indemnity scale for all motor body injury claims; to avoid any ambiguous decisions in some court cases, this way, at least technically the pricing and reserves for the compulsory policy would be more accurate and adequate.
We are also facing a big media propaganda in the motor body injury policy by the Ministry of Health and Social Security Fund, where we are being accused as an industry of not covering our obligations and relying on the government by transferring the claimants to get hospitalized on the account of the Ministry of Health or the Social Security Fund.
This is exaggerated, noting that the main issue is in the government entities themselves. If they had controlled the internal corruption, they would not have been exposed to such fraud cases. I think they should clean up their house to avoid such fraudulent attempts and any fraudulent case should be coordinated with the ICC and the Ministry of Economy, where they will be capable to recover those claims from the liable insurance company.
In my opinion, some or most of these cases are linked to either mutual funds or uninsured motorists. To clarify, mutual funds do not only sell medical insurance, they also sell motor insurance, property insurance, life insurance and not a single governmental body is being able to stop them. Mutual funds were originally created to only sell medical insurance in K class, which is a special low cost class targeted for farmers and workers in the agriculture field. That is why they are under the responsibility and review of the Ministry of Agriculture, whereas the ministry does not have the adequate department or personnel to regulate them. Every couple of days, we read a small article published in some newspapers or online platform stating that insurance companies are thieves and are not fulfilling their responsibilities. Both the Ministry of health and Social security fund are pushing hard to get the whole compulsory insurance portfolio, which I believe is totally out of their expertise.
Some critics think that insurance companies are making huge profits out of the compulsory insurance, without having accurate data and noting that the compulsory insurance, which was imposed in 2003 and was priced at Fifty US dollar or the equivalence in Lebanese pound and has never increased since. At the same time, medical expenses and hospital fees have increased drastically to more than 50 % during the same period. Also noting that there are around 6 to 7 hundred thousand vehicles insured in Lebanon out of over one half million registered cars, which means that even the Ministry of Interior is not doing the necessary to impose the law and oblige each and every car owner to buy compulsory insurance to lower the number of claims that may go to the Ministry of Health or to the Social Security Fund for hospitalization. When all the vehicles in Lebanon are insured, then they will be able to control the costs incurred to cover these incidents. I am sure most of them are either uninsured or are linked to mutual funds. Very few are linked to insurance companies; very few are fraud cases by insurance companies.
BL: Don't you agree that it is high time to change motor insurance regulations especially that motor claims management can often be a complex process, given that every situation is unique and usually requires a number of varying components to resolve?
Georges Matossian: Changing motor insurance regulations is almost impossible because this depends on the market appetite. The management of motor insurance is time consuming; has a lot of backdoors for fraud, but we created in Lebanon the motor risk center, where we as insurance companies provide the claims experience of each and every client through the car's VIN number or their driver’s license number. This project helped insurance companies to avoid fraud cases where fraudulent clients were able to insure their cars in two companies and consequently compensate themselves from both companies. So it is a brilliant idea and the data base is growing with time and should be used for a wider scope or purpose. I believe we are going to reach a stage where we are going to use it to do motor underwriting on a case by case basis. Its usage will educate the insured to become a safer driver, noting that insurers will implement higher risk premiums or a deductible on negligent clients. I believe it is very important that insurers start using this platform to stress on underwriting for comprehensive motor all risk insurance.
BL: What are your comments on Wildfire risks and insurers' underwriting strategy that hit wildfires in Greece and British Columbia, Canada, suffered its worst wildfire season in history. In Australia, bushfires burned on Sydney's perimeters in 2018 and 2019? How do we compare them to those risks in Lebanon and the region? How the Lebanese insurance companies deal with such wildfire claims?
Georges Matossian: These are two separate issues!
I lived in California, United States for many years. California almost every year faces wild fires and most of their wild fires are based on arson. The only way we can control them is in property insurance. We are keen on doing the proper underwriting for each and every risk. Properties that are surrounded by trees are prone to wild fire risks and we should take it into consideration while underwriting or pricing the risk and applying the adequate rate increase. Most wild fires that occurred in Greece, Australia or U.S are caused by arson and always have a purpose. In Lebanon, three years back, there was a big wild fire in Jeita and it was purely arson as the location is secluded, its main purpose was to either sell the wood as coal or to clear the land from trees for investment profits. It is just a way to trick the law.
BL: How climate change affect Lebanon's insurance sector?
George Matossian: Climate change. I do not believe it will do such a big effect to the insurance industry in Lebanon. Reinsurers discuss climate change because they have risks all over the world. Main issue in climate change is the melting of Icebergs and the decrease in their surface area, which in turn affects the ecological life forms and increases the water mass on the planet, which in time will engulf shallow parts of lands.
BL: With today's changing conditions in the banking sector especially regarding the recent fluctuations in the exchange rate of the US dollar and the rising prices of gold, how is it possible for insurance companies to help the financial sector to support credit risk management?
Georges Matossian: The recent fluctuation in the exchange rate of the U.S dollar is now finally controlled by the Central Bank of Lebanon noting that most insurance policies are priced in US dollars. The only way to help the economic growth is by attracting foreign investments which will create mutual opportunities and new insurance premiums but to do so we need stability, investor protection and security. Another major contributor to the economy is the government's supported housing loans with low interest, as the construction industry is supplied by more than 500 interrelated industries. Housing loans will re-encourage people to invest in new projects, which in turn will boost many industries and pull them out of their stagnant situation. In its turn the insurance industry will boost its liability, engineering, property, life and financial risk lines.
BL: How do you vision pension funds in Lebanon?
Georges Matossian: I think that they are more than adequate for our economic situation. The Social Security Fund is responsible for the pensions in Lebanon. I believe it is very fair compared to what is available all around the world. It is very similar to what is available even in France. It is good.
BL: What is the role of the Lebanese insurance companies in providing social security to all categories of society, especially non-citizens who are not covered by the social security system?
Georges Matossian: It is not the responsibility of insurance companies. This is the responsibility of the Ministry of Labor and by law it is compulsory for all businesses to enroll their employees in the social security fund, for locals or foreigners. This is part of the labor law of the country. Whereas foreigners contribute to social security and are not allowed any benefits, this law is implemented to give the Lebanese nationals an advantage over foreign workers. It is about time to implement it. Many industries replaced their Lebanese staff to Syrian or Egyptian or Indian to scale down their cost and increase profits. Now that the Present Minister applied the law and most parties encouraged it. I believe it is the right thing to do, because the Lebanese have the right for a job prior to foreigners.
BL: What are the steps or the regulations needed so that the Lebanese insurers face profitability and consolidation pressures?
Georges Matossian: The regulations that are put today are more than adequate to control insurance companies and make them profitable. However, if the political interference stops, the industry will be more than fine. The ICC is doing its job in full however, in some cases, their hands are tied because of bureaucracy.
BL: What is your opinion on the present economic situation in Lebanon and how far does it affect the insurance industry?
Georges Matossian: The political situation affected all insurance companies in all different aspects as I said due to insecurity or instability. Most of the major economic sectors are frozen. Thus, it affects the insurance companies directly. We are not here only to do motor and medical insurance that are the main products in the Arab world but their risk is quit high and usually the portfolio is balanced with property, engineering and life insurance.
The International Monetary Fund (IMF) estimated that Lebanon's growth will be below potential in the near term, hovering around 1.2-1.5 percent for 2017 and 2018. Growth is projected to increase gradually towards three percent in the medium term. Inflation rose to five percent in 2017, and the IMF forecasts it will remain below five percent in 2018.
BL: Should insurance companies raise awareness on these lines of business?
Georges Matossian: The awareness is available but first of all purchasing power of clients has decreased drastically. Secondly, the lack of investment in major industries that are the main suppliers for these insurance products are frozen due to the economic situation and the regional instability.
BL: What are the steps needed to raise the importance of the insurance business at the governmental level?
Georges Matossian: The insurance sector is more important than the banking sector. All around the world, the insurance sector is the backbone of the banking sector except in Lebanon. In Europe, insurance companies own banks. In Lebanon, it is the other way round. A small example, banks in Lebanon are allowed to take risks and they are indirectly doing the job of the insurance company which is ridiculous. We complained several times but unfortunately nobody is listening. Basically, recent ministers who handled the Ministry of Economy stressed on the importance of the insurance industry and gave us at least more credibility than the expiring ministers. However, there are many laws that have to be updated for the insurance industry to flourish
Nevertheless, the implementation of new laws or to change the existing law in Lebanon faces a lot of bureaucracy, political lobbying and time.
BL: Would you like to add anything else?
Georges Matossian: There is an issue that is being discussed in our market and it is the online insurance. There was an important discussion between the brokers’ syndicate and several companies that were selling online insurance. We have proposed a solution and hopefully it will be implemented. The solution is to create an online platform by the brokers' syndicate and another pool by the insurance companies, where we create a platform that sells the motor compulsory insurance, foreign labor compulsory insurance and may be travel insurance. This way, premiums will be divided among all insurance companies and the commission will be shared by all the brokers that are members of the syndicate. It will give the broker’s syndicate a push to attract and encourage all brokers in Lebanon to adhere to the syndicate, noting that these policies are considered micro insurance and the cost that the brokers put to sell or manage these polices in their portfolios is weighty and uneconomical. So, through an online shared platform, the cost will be diluted, all parties involved will have a share and this will pave the road on the implementation of digital insurance sales in Lebanon.
