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ASSESSING PROFITABILITY AND GROWTH OF INSURANCE SECTOR IN SAUDI ARABIA: USING FINANCIALS AND TANGIBLES
Corresponding Author(s) : Anis Ali
Humanities & Social Sciences Reviews,
Vol. 7 No. 6 (2019): November
Abstract
The purpose: The purpose of this study to find out the contribution of internal (financial) and external (tangible & human resource) factors of growth and development of the Saudi insurance sector and facilitate suggestions.
Methodology: The study considers financial data of insurance companies of Saudi Arabia for the period 2013 to 2017for internal analysis while data from 2010 to 2015 for external analysis. Trend indices (chain based index numbers & fixed base index numbers) from financial statements and insurance establishments and human resources of the insurance industry are prepared to know the internal and external factors responsible for growth and development. The averages of trend indices are obtained to get the results of the analysis.
Findings: The study finds that there is negativity in operational efficiency. It also finds that the internal liabilities or shareholders’ equities are decreasing continuously. Also, establishments engaged in insurance activities are not enough to cover all prospective customers.
Implications: The finding implies that the increase in revenues is not enough. The findings also imply a weak long term paying ability towards this the study recommends further investment in profitable options like securities and avoid excess liquidity and increase insurance penetration.
Novelty: This study is one of the few that assesses the performance of the insurance sector of Saudi Arabia. In the process, it performs internal analysis using operational and financial factors; and an external analysis using tangibles and intangibles.
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- Akhtar, M.H.(2018).Performance analysis of Takaful and conventional insurance companies in Saudi Arabia. Benchmarking: An International Journal, 25(2), 677-695. https://doi.org/10.1108/BIJ-01-2017-0018 DOI: https://doi.org/10.1108/BIJ-01-2017-0018
- Alharbi, M. F. (2017). An empirical analysis of customer satisfaction with cooperative health insurance in Saudi Arabia: The role of customer knowledge, service characteristics, and national culture. International Journal of Heath Science and Research, 7(11),234-246.
- Ali, A. &Tausif, R. (2018). Service quality, customers’ satisfaction, and profitability: an empirical study of Saudi Arabian insurance sector. Investment Management and Financial Innovations, 15(2): 232-247.DOI:10.21511/imfi.15(2).2018.21 DOI: https://doi.org/10.21511/imfi.15(2).2018.21
- Al-Amri, K., Gattoufi, S., & Al-Muharrami, S. (2012).Analyzing the technical efficiency of insurance companies in GCC. The Journal of Risk Finance, 13(4), 362-380. DOI 10.1108/15265941211254471 DOI: https://doi.org/10.1108/15265941211254471
- Al-Salih , A., Napier & John, C.(2012).Consumer Preferences for Takaful and Conventional Insurance : A UK-Saudi Arabia Comparison. Hamdan Bin Mohammed e-University, available at https://ssrn.com/abstract=2431385
- Ansari, Z.A.(2011).Analysis of the Impact of Reforms on Insurance Industry of Saudi Arabia. Interdisciplinary Journal of Research in Business, 1(8),28-37.
- Ansari, Z. A. (2012). An empirical analysis of risk perception, remedial measures and behavior of people in Saudi Arabia towards insurance. African Journal of Business Management, 6(10), 3733- 3744. DOI: https://doi.org/10.5897/AJBM11.022
- Darwish, S. (2018). Risk Management and Insurance Practices in Protecting the GCC Economies: Impact of Climate Change. European Scientific Journal, 14(13):165-178. DOI: https://doi.org/10.19044/esj.2018.v14n13p165
- Ebenezer, O.O., Islam , M. A., Zukime, M., Junoh, M., &Yousoff, W.S.,(2019). The Effects of Financing risk on the value of firm and profitability; Evidence from Nigerian commercial banks. Asian Economic and Financial Review, 9(7):864-874. DOI: https://doi.org/10.18488/journal.aefr.2019.97.864.874
- Guendouz, A.A. &Ouasaaf, S.,(2018). Determinants of Saudi Takaful Insurance Companies Profitability. Academy of Accounting and Financial Studies Journal, 22(5):1-24.
- Haque, M. I., & Sultan, Z. A., (2019). A structural equation modeling approach to validate the dimensions of SERVPERF in insurance industry of Saudi Arabia. Management Science Letters, 9(4): 495-504.DOI: 10.5267/j.msl.2019.1.012 DOI: https://doi.org/10.5267/j.msl.2019.1.012
- Haque, M. I. (2019). Growth accounting for Saudi Arabia. Asian Economic and Financial Review, 9(6): 691-701.DOI:10.18488/journal.aefr.2019.96.691.701 DOI: https://doi.org/10.18488/journal.aefr.2019.96.691.701
- Isphaq, M. (2015). Measuring Quality of Service from Consumers’ Perspectives: A Case of Healthcare Insurance in Saudi Arabia. Health journal Science Journal, 10:1-11.
- Oitsile, B.,Galebotswe, O.,&Sekwati, L.,(2018). Insurance - Economic growth nexus: evidence from Botswana. Asian Economic and Financial Review, 8(6): 843-852.DOI:10.18488/journal.aefr.2018.86.843.852 DOI: https://doi.org/10.18488/journal.aefr.2018.86.843.852
- Saad, A. M., &Islam, r., (2016). Consequences of service quality in the insurance industry: A case study on Saudi Arabia insurance industry. International Business Management, 10(3): 209-217. DOI: 10.3923/ibm.2016.209.217
- Saaty, A. S. (2012). An empirical analysis of the strategies undertaken by insurance companies in Saudi Arabia to enhance customer loyalty and customer retention. International Journal of Economics and Management Sciences, 1(11): 20-25.
- Toukabri, M., & Ibrahim, H.,(2016). Challenges and ways to develop insurance industry in The paperKSA market. International and Multidisciplinary Journal of Social Sciences, 5(2),152-182.DOI:10.17583/rimcis.2016.1963 DOI: https://doi.org/10.17583/rimcis.2016.1963
- http://www.albilad-capital.com/Research_EnglishReport/InsuranceSectorQ417EN.pdf,
- Accessed on 04 June, 2019.
- https://s3-eu-west-1.amazonaws.com/content.argaam.com/32852b01-d8fd-49d0-b25f-bec5cfec0a86.pdf , Accessed on 05 June,2019
- https://www.stats.gov.sa/en/488-0, Accessed on 04 June, 2019
References
Akhtar, M.H.(2018).Performance analysis of Takaful and conventional insurance companies in Saudi Arabia. Benchmarking: An International Journal, 25(2), 677-695. https://doi.org/10.1108/BIJ-01-2017-0018 DOI: https://doi.org/10.1108/BIJ-01-2017-0018
Alharbi, M. F. (2017). An empirical analysis of customer satisfaction with cooperative health insurance in Saudi Arabia: The role of customer knowledge, service characteristics, and national culture. International Journal of Heath Science and Research, 7(11),234-246.
Ali, A. &Tausif, R. (2018). Service quality, customers’ satisfaction, and profitability: an empirical study of Saudi Arabian insurance sector. Investment Management and Financial Innovations, 15(2): 232-247.DOI:10.21511/imfi.15(2).2018.21 DOI: https://doi.org/10.21511/imfi.15(2).2018.21
Al-Amri, K., Gattoufi, S., & Al-Muharrami, S. (2012).Analyzing the technical efficiency of insurance companies in GCC. The Journal of Risk Finance, 13(4), 362-380. DOI 10.1108/15265941211254471 DOI: https://doi.org/10.1108/15265941211254471
Al-Salih , A., Napier & John, C.(2012).Consumer Preferences for Takaful and Conventional Insurance : A UK-Saudi Arabia Comparison. Hamdan Bin Mohammed e-University, available at https://ssrn.com/abstract=2431385
Ansari, Z.A.(2011).Analysis of the Impact of Reforms on Insurance Industry of Saudi Arabia. Interdisciplinary Journal of Research in Business, 1(8),28-37.
Ansari, Z. A. (2012). An empirical analysis of risk perception, remedial measures and behavior of people in Saudi Arabia towards insurance. African Journal of Business Management, 6(10), 3733- 3744. DOI: https://doi.org/10.5897/AJBM11.022
Darwish, S. (2018). Risk Management and Insurance Practices in Protecting the GCC Economies: Impact of Climate Change. European Scientific Journal, 14(13):165-178. DOI: https://doi.org/10.19044/esj.2018.v14n13p165
Ebenezer, O.O., Islam , M. A., Zukime, M., Junoh, M., &Yousoff, W.S.,(2019). The Effects of Financing risk on the value of firm and profitability; Evidence from Nigerian commercial banks. Asian Economic and Financial Review, 9(7):864-874. DOI: https://doi.org/10.18488/journal.aefr.2019.97.864.874
Guendouz, A.A. &Ouasaaf, S.,(2018). Determinants of Saudi Takaful Insurance Companies Profitability. Academy of Accounting and Financial Studies Journal, 22(5):1-24.
Haque, M. I., & Sultan, Z. A., (2019). A structural equation modeling approach to validate the dimensions of SERVPERF in insurance industry of Saudi Arabia. Management Science Letters, 9(4): 495-504.DOI: 10.5267/j.msl.2019.1.012 DOI: https://doi.org/10.5267/j.msl.2019.1.012
Haque, M. I. (2019). Growth accounting for Saudi Arabia. Asian Economic and Financial Review, 9(6): 691-701.DOI:10.18488/journal.aefr.2019.96.691.701 DOI: https://doi.org/10.18488/journal.aefr.2019.96.691.701
Isphaq, M. (2015). Measuring Quality of Service from Consumers’ Perspectives: A Case of Healthcare Insurance in Saudi Arabia. Health journal Science Journal, 10:1-11.
Oitsile, B.,Galebotswe, O.,&Sekwati, L.,(2018). Insurance - Economic growth nexus: evidence from Botswana. Asian Economic and Financial Review, 8(6): 843-852.DOI:10.18488/journal.aefr.2018.86.843.852 DOI: https://doi.org/10.18488/journal.aefr.2018.86.843.852
Saad, A. M., &Islam, r., (2016). Consequences of service quality in the insurance industry: A case study on Saudi Arabia insurance industry. International Business Management, 10(3): 209-217. DOI: 10.3923/ibm.2016.209.217
Saaty, A. S. (2012). An empirical analysis of the strategies undertaken by insurance companies in Saudi Arabia to enhance customer loyalty and customer retention. International Journal of Economics and Management Sciences, 1(11): 20-25.
Toukabri, M., & Ibrahim, H.,(2016). Challenges and ways to develop insurance industry in The paperKSA market. International and Multidisciplinary Journal of Social Sciences, 5(2),152-182.DOI:10.17583/rimcis.2016.1963 DOI: https://doi.org/10.17583/rimcis.2016.1963
http://www.albilad-capital.com/Research_EnglishReport/InsuranceSectorQ417EN.pdf,
Accessed on 04 June, 2019.
https://s3-eu-west-1.amazonaws.com/content.argaam.com/32852b01-d8fd-49d0-b25f-bec5cfec0a86.pdf , Accessed on 05 June,2019
https://www.stats.gov.sa/en/488-0, Accessed on 04 June, 2019