The royal decree of Saudi Arabia’s King Salman allowing women to drive is set to greatly benefit the motor insurance sector, as more vehicles are expected to enter the Middle Eastern nation’s roads.
LMC Automotive, an automotive market intelligence firm, told Reuters that allowing women to drive could boost car sales in Saudi Arabia by around 15% to 20%. Currently, the country has around 220 vehicles per 1,000 adults, and this is expected to rise to around 300 by 2025.
More vehicles entering the market naturally mean more insurance policies being purchased. According to a report by Middle Eastern business portal AMEinfo, this growth would do well to inject some extra energy into a slumping insurance sector.
Data from financial services firm Albilad Capital showed that in 2016, the insurance sector of Saudi Arabia came to a screeching halt, posting just 0.5% growth, compared to 20% growth in 2015. It added that compulsory insurance, such as health and motor, still dominate the sector, making up 84% of the market.
Furthermore, the insurance density, defined as insurance spending per capita, decreased by 18.6% in 2016 at SAR1,271 (US$339) compared to SAR1,561 (US$416) in 2015.
This could be offset by growth in the motor insurance sector, which is expected to reach US$2.89 billion by 2025.
“Compared with mature insurance markets, the insurance penetration and density rates are considered low in the Saudi market, which shows that the insurance sector is still in the process of growth and has major future opportunities and possibilities that are unexploited until now,” the report by Albilad said.
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