Hollywood director Woody Allen once joked: “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”
But lack of insurance is no laughing matter for people who have lost their jobs in the current financial crisis.
For expatriates, losing a job means an instant notification of loss of salary to their bank. The bank freezes all accounts – in credit or overdrawn; stops all credit cards; no longer honours any post-dated cheques in the market; and, if it is owed money, notifies immigration so that their customers cannot leave the country.
Small wonder that this year has seen a slew of expatriates vanish in the middle of the night without telling their employer or even their friends that they were leaving.
GCC governments do not provide a safety net for expatriates who lose their jobs. Laws typically date back to a time when visiting workers didn’t put down their own roots.
Oil workers, construction engineers and airline staff were taken care of by their companies: housing, schools, transportation were all provided for in the much-missed ‘expat package’.
Banks were barely exposed to any risk with these expats. Customers might have credit cards and overdrafts, but very few had tens of thousands of dollars of exposure on rent cheques and car loans.
I remember the time well. In the early nineties, I had to leave a job in Dubai to return to the UK. My gratuity payment easily covered the outstanding debts I had on a modest car and small overdraft, despite the fact that I’d only been in the UAE for a couple of years on a penurious salary.
How things have changed in the past decade. It is common today for the debit column of a Western expatriate in the lower Gulf to look something like this:
PDCs for year’s rent up front: $55,000
Outstanding car loan: $50,000
Credit card balance: $10,000
Overdraft: $10,000
That’s $125,000 worth of credit secured against the assumption that a salary of, say, $10,000 will land in the bank every month.
And that is just the people that rent their homes. In the boom times banks were offering $500,000 mortgages to people with salaries as low as $3,000 per month. That’s almost 14 times their annual salary.
Against all this colossal debt, there has been virtually no mechanism to insure oneself against being made redundant – an immeasurably more likely event than death or a house being destroyed (both of which are insurable) for the typical expat.
There are cultural barriers to the mass uptake of insurance in the Gulf, and the creation of a broad, deep and sophisticated insurance industry.
But the region’s economies have galloped beyond what might have been deemed culturally acceptable ten years ago, and the insurance industry (and the Islamic version, Takaful), the financial services authorities, the government and the legal system must catch up.
An evening spent with an insurance salesman might not be the greatest pleasure in life, but it is time for authorities, businesses and individuals of the Gulf to do just that.
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