Visionary Leader: Johnson Varughese
Meet Johnson Varughese, the transformative force behind Walaa Insurance’s unparalleled success. Joining in 2007 as CFO, he laid the foundation for financial excellence, navigating regulatory landscapes. In 2012, he assumed the role of CEO, orchestrating a ‘turn-around’ and securing a surplus in shareholders’ equity. Under his guidance, Walaa emerged as Saudi Arabia’s fifth-largest insurer with A- from S&P and A3 from Moody’s.
A mergers maestro, Johnson facilitated historic mergers in 2020 (MetLife AIG ANB) and 2022 (Sabb Takaful). Beyond the boardroom, he chairs the Finance Sub-Committee, leaving an indelible mark on the industry. With over 30 years of experience spanning diverse sectors, Johnson’s strategic brilliance and leadership acumen promise a riveting exploration in our upcoming interview. Get ready to uncover the mind behind Walaa Insurance’s triumphs in this interview.
S G Afzal BiyaBani (Our Resident Editor): How does the establishment of the Insurance Authority (IA) impact the Saudi insurance market, according to you?
Johnson Varughese: Establishment of the IA will accelerate the growth of the Insurance Sector as the Industry will now get focused attention. The strategy of IA is likely to be aligned with Vision 2030 and Financial Sector Development plan. Since savings is one of the pillars of Vision 2030, I hope to see a lot of emphasis on Protection and Savings Insurance Products. Other lines of businesses (Health insurance, Vehicle insurance and Medical Insurance) have seen significant growth in the recent past, and the growth will be further boosted in line with the developmental projects under implementation.
S G Afzal BiyaBani (Our Resident Editor): What are the responsibilities that the Insurance Authority (IA) is expected to assume over time in the regulation of the insurance market?
Johnson Varughese: IA is vested with several responsibilities and these mandates include:
- Draft and recommend the national strategy for insurance sector.
- Review the existing laws, rules and circulars and taking into consideration all, draft the national insurance law.
- Issue licenses to practice insurance and regulate the insurance activities within the Kingdom.
- Develop insurance products.
To summarize in one line, IA is mandated with the development of the Insurance sector within the Kingdom.
S. G Afzal BiyaBani (Our Resident Editor): How does the creation of the IA facilitate and expedite the implementation of sector strategies, as mentioned by you?
Johnson Varughese: It is expected that the sector will develop the national insurance strategy, in consultation with the Insurance sector and other stakeholders. Once submitted to the authorities, the IA will monitor the implementation of the same in a timely manner.
S. G Afzal BiyaBani (Our Resident Editor): What are the factors contributing to the profitability surge in the Saudi insurance sector for the first nine months of 2023?
Johnson Varughese: Two factors mainly contributed to the surge in profit for the first nine months of 2023. The first one, higher investment income, mainly on account of hike in the interest rates and the second one, better underwriting discipline, especially within the vehicle insurance segment.
S. G Afzal BiyaBani (Our Resident Editor): How has the enforcement of campaigns against uninsured drivers impacted motor insurance policies in Saudi Arabia?
Johnson Varughese: The industry has been advocating for enforcement of motor insurance for the last several years. Although the Third-Party motor insurance policy was mandatory, it was not enforced. As a result, almost 50% of vehicles were not insured. The traffic police department has announced that effective 1 October 2023, uninsured vehicles will be subjected to penalties. The police, insurance companies and Najm put in a lot of efforts to widely publicize the decision and in fact the insurance companies have offered up to 20% discount to the new policyholders. It is understood that over a million new policies were issued in the month of September 2023 and this has been a remarkable feat for the insurance sector. As the sector is focusing on awareness, together with the decision to enforce insurance, I expect the vehicle insurance penetration to be above 80% within the next two years. Insurance companies are making efforts to ensure that the policies are sold at affordable rates, particularly to better drivers.
S. G Afzal BiyaBani (Our Resident Editor): In which areas is growth observed in the Saudi insurance sector?
Johnson Varughese: We are seeing growth in all segments, led by health insurance, motor insurance and then other lines. In view of the major projects that are under implementation, we have seen significant growth in the construction project related insurance.
S. G Afzal BiyaBani (Our Resident Editor): How does market consolidation contribute to the sustainability and competitiveness of insurance companies?
Johnson Varughese: Insurance is a capital-intensive business as the companies assume significant risk on their books. The risk-taking capacity is linked to the solvency of the company. Another important point to be kept in mind is the cost of running the business. Unless companies manage their expense ratio within a certain threshold, it will be difficult for them to compete with a more efficient company. In other words, insurance is a game of scale. Companies can achieve both these objectives, capital, and scale, through a merger. Other advantages of a merger include access to human capital, system, diversification of portfolio, availability of new products and the like.
S. G Afzal BiyaBani (Our Resident Editor): What initiatives and indicators suggest promising days ahead for the Saudi insurance sector, as per your insights?
Johnson Varughese: The establishment of Insurance authority with a focus on the development of the sector and combining the powers vested with SAMA and CCHI (two separate regulators, one for all insurance related matters and the other one exclusively for health insurance related tasks) under one authority, IA is a very positive indicator. Growth of insurance is linked to the growth of economy and the Saudi economy is in the cusp of a major leap and this will in turn reflect in the growth of the insurance sector. One area that needs a real push or support is the Protection and Savings line of business and I am sure this too will catch up with other lines because this is one of the topmost priorities for the sector.
The Insurance Industry is working closely with the regulator in developing new products, raising awareness, protection of customer rights, settlement of claims within stipulated timeline, raising the standards of service, digitization of sales and services, curbing unethical practices etc. The sector has grown in double digits over the last several years and the growth rate will remain high for some more years to come.
Closing Insights and Gratitude from Johnson Varughese:
In our enriching dialogue with Mr. Johnson Varughese, we’ve delved into the intricacies of the Saudi insurance landscape, gaining invaluable insights into its present and future. On behalf of The Insurance Times readers and our esteemed Resident Editor for MENA, S. G Afzal BiyaBani, we extend our sincere gratitude to Mr.Varughese for sharing his profound expertise.
His astute observations on the impact of the Insurance Authority (IA), the surge in profitability, and the industry’s growth dynamics provide our readers with a comprehensive understanding of the evolving insurance sector. Mr.Varughese’s foresight into market consolidation, coupled with his optimism for the sector’s promising future, enriches our readers’ perspectives.
As we anticipate the continued growth and transformation of the Saudi insurance industry, we thank Mr. Johnson Varughese for his time, expertise, and commitment to fostering awareness and knowledge within our readership. Your contribution has undoubtedly elevated the discourse on insurance, and we look forward to further enlightening conversations in the future.
