MENAFN - Arab News
Medical insurance makes up 55% of total premiums in KSA
(MENAFN - Arab News) Medical insurance is now about 55 percent of total insurance premiums in Saudi Arabia, up from about 40 percent in 2008, according to Standard & Poor's Ratings Services.
Big Saudi insurance companies effectively control distribution and ownership of the majority of the market now, S&P points out.
It said the Council of Cooperative Health Insurance had proven to be very effective at steering the market in a more stable direction with a sustainable level of provision
Across the GCC region, compulsory health schemes are now the norm.
S&P expects a progressive surge in premium income from the introduction of compulsory medical insurance in Dubai, but "probably not a material increase until 2015".
S&P has issued a press release on its views on the impact of the scheme on the insurance sector.
In its opinion, premium growth will not necessarily enhance the quality of the insurance market.
The larger insurance companies are best placed to receive the first tranche of licenses because they have the necessary operational scale and efficiencies, as well as track records of tightly managed schemes and customer satisfaction.
However, S&P does not think that the big insurance companies will automatically become the dominant medical insurers in the market.
Rather, it believes that over time, the quality of service given, rather than price, will dictate who wins contracts.
The role of the DHA in monitoring the market place is therefore crucial, according to S&P.
In mid-December, the emirate of Dubai announced that, after many months of expectation and consideration, it will introduce compulsory medical insurance for all workers and dependents in the emirate.
Standard & Poor's Ratings Services said: "Although it is difficult to accurately predict the total new gross premiums that will be added to the market following the implementation of the law, Saudi Arabia and Abu Dhabi provide useful reference points."
The report said: "We have seen medical insurance become the dominant line of business in both Saudi Arabia and Abu Dhabi since compulsory medical schemes were introduced there in the past decade.
"In Saudi Arabia, we estimate that medical insurance is now about 55 percent of total insurance premiums, up from about 40 percent in 2008.
"In Abu Dhabi, we estimate it is about 40 percent. The Emirates Insurance Authority (EIA) report for 2012 identifies medical business as contributing 32 percent to market premiums in UAE," S&P said.
"Looking at statistics published by the EIA, we observe that in 2005, medical was 8 percent of the UAE nonlife insurance market; in 2007 it had grown to 18 percent and by some 4x in volume," it said.
In 2009, medical was 25 percent of the nonlife sector, with premium volume again twice that in 2007.
The growth of medical insurance premiums in this period reflects both the introduction of compulsory cover in Abu Dhabi, and also that this was a period of high economic and structural growth for the country.
"We expect similar factors to influence the growth of this line for the next five years or so. We also note that the UAE is planning for its population to increase significantly over the next decade, and this too will prompt growth in medical insurance, as the number of employees and dependents requiring cover rises," said the S&P statement.
Medical insurance is a high volume, and usually low margin, line of business; that same EIA report identifies a 2012 market loss ratio of 83 percent for medical, so there was only a 17 percent margin to cover production and management costs.
Such insurance therefore necessitates very high service levels by the providers to keep the various stakeholders happy.
In contrast to the state subsidy seen in Abu Dhabi, the Dubai Health Authority (DHA) is licensing only private sector insurance companies that pass the necessary qualifying criteria, and there is no government subsidy.
The terms of the roll out are:
· Companies with 1,000 employees must have cover in place by Oct. 1, 2014;
· Companies with 100-999 employers must have cover in place for August 2015; and
· Companies with fewer than 100 employees, including family, dependents, and domestic workers, must have cover in place for July 2016.
This staged introduction mirrors the approach taken by Saudi Arabia, and, as many large employers in Dubai already have medical schemes in place, the real impact on market premium levels is unlikely to be felt until 2015-2016, when the smaller employers are required to introduce it.
The report added: "In our opinion, premium growth will not necessarily enhance the quality of the insurance market. Medical insurance has seen a fiercely competitive market in recent years. Many insurance companies, particularly the smaller and newer entities, have used aggressive pricing to win medical scheme covers and then struggled to make any underwriting margin on the business. It is our opinion that the larger insurance companies are best placed to receive the first tranche of licenses because they have the necessary operational scale and efficiencies, as well as track records of tightly managed schemes and customer satisfaction."
S&P said: "However, we do not think that the big insurance companies will automatically become the dominant medical insurers in the market. Rather, we believe that over time, the quality of service given, rather than price, will dictate who wins contracts."
The role of the DHA in monitoring the market place is therefore crucial.
"Consequently, we approve of the DHA's plan to tightly monitor the medical insurance providers to ensure that they deliver services on a sustainable basis. We interpret that to mean service provision with technically profitable pricing, and this will be tested by the pricing ranges set by the DHA for the new cover," S&P said.
Again, this mirrors the Saudi market where the Council of Cooperative Health Insurance (CCHI) monitors risk pricing to make sure that insurers are offering sustainable service levels to the policyholders and covered employees.
The Saudi medical market faced significant hurdles - initially administrative and then in underwriting performance terms - in the three to four years following the introduction of compulsory medical schemes in 2006.
In response, the CCHI has proven to be very effective at steering the market in a more stable direction with a sustainable level of provision.
But it is the big Saudi insurance companies that effectively control distribution and ownership of the majority of the market now.
The nature of medical risk management commends it to high volume management, as this can more effectively drive economies of scale. As a result, it is possible that the companies best placed to service this demand will be the bigger companies that are already managing substantial
medical accounts in the market - these insurers can more readily provide this level of cost-effective service.
This could therefore lead to some concentration in the top companies in Dubai.
Across the GCC region, compulsory health schemes are now the norm, and the following are in place:
· Bahrain: Compulsory for nationals since 2003, and expatriates since 2013.
· Kuwait: Compulsory for expatriates since 2000.
· Oman: No compulsory insurance, but all companies employing over 50 people must offer health services.
· Qatar: To be compulsory for all expatriates by the end of 2014; Social Health Insurance scheme covers nationals.
· Saudi Arabia: Compulsory for all foreign workers and their dependents since 2005 in the private sector, rolled out in stages by the number of employees up to 2008.
· UAE: Compulsory in Abu Dhabi for all employees since 2005; regulated by the Health Authority of Abu Dhabi (HAAD). Daman (state-owned insurer) offers the "thiqa" product, which covers all UAE nationals through a third-party administrator relationship subsidised by the government.
S&P anticipates that the other northern UAE emirates of Ras Al-Khaimah, Sharjah, Ajman, Fujairah, and Umm Al-Quwain will eventually introduce compulsory insurance schemes in line with Dubai at an indeterminate time.
"But if they do not, then it is feasible that employers could choose to relocate staff residences to avoid the cost of compulsory covers in Dubai to other emirates. In this regard, this new Dubai law could therefore be modestly influential in the UAE's future population dynamics," according to the report.
MENA News Headlines
|Mar 11 2014||Palestinian Injured, 12 Detained in Jerusalem ,Qatar News Agency|
|(MENAFN - Qatar News Agency) One Palestinian was injured in an Israeli attack on the town of Anata in Occupied Jerusalem last night.
Palestinian sources reported that tens of Israeli special ...|
|Mar 11 2014||Amnesty Accuses Syrian Forces of Committing War Crimes in Yarmouk ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Amnesty International has accused the Syrian government forces of starving the population and targeting doctors in Yarmouk refugee camp in the outskirts of the capital ...|
|Mar 11 2014||Qatari Mediation Succeeds in Releasing Maaloula Nuns ,Qatar News Agency|
|(MENAFN - Qatar News Agency) HE Foreign Minister Dr Khalid bin Mohamed Al Attiyah stated that the Qatari mediation has succeeded in releasing 13 Orthodox nuns who were abducted last December from the ...|
|Mar 11 2014||Two-day Education UK Exhibition Begins Tomorrow ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The British Council's Education UK Exhibition will open Tuesday at the Radisson Blu, showcasing the best British higher education institutions and the growing ...|
|Mar 11 2014||Al Rayyan Beat Al Ahli in GCC Club Volleyball Championship ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Al Rayyan team kept their winning streak in the GCC Club Volleyball Championship by securing their second victory over Al Ahli of Bahrain in Manama on Sunday. ...|
|Mar 11 2014||Qatar to Host Yemen National Team for Two Friendlies ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Qatar is ready to host two friendly matches involving the Yemen national team in Doha, it was announced on Monday.
Yemen will play Lesotho on March 20, before taking ...|
|Mar 11 2014||CUO of the GCC Concludes 6th Meeting ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The Customs Union Organization (CUO) of the Cooperation Council for the Arab States of the Gulf (GCC) concluded on Monday its 6th meeting which ran for two days at the ...|
|Mar 11 2014||Strong Demand for MENA Insurance Markets, Says New Report ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Compulsory insurance requirements and continued investments into infrastructure projects will drive demand in the Middle East and North Africa region's insurance sector, ...|
|Mar 11 2014||QNB Group Expects Recovery of Jordanian Economy by 2016 ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The GDP of the Jordanian economy will see accelerated growth from 2.9% of last year to 3.6% in 2014, Qatar National Bank (QNB) Group said Monday. The number is likely to ...|
|Mar 11 2014||Ooredoo Chairman Appointed A Member of World Bank's Advisory Council ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Ooredoo Board of Directors'Chairman HE Sheikh Abdullah Bin Mohammed Bin Saud Al Thani was appointed member of the World Bank's Advisory Council on Gender equality and ...|
|Mar 11 2014||Kuwait's spending increases 8 percent in 10 months ,MENAFN|
|(MENAFN) Government spending in Kuwait has boosted by 8 percent in the first 10 months of this fiscal year compared to the same period a year earlier, according to Arab News.
The government ...|
|Mar 11 2014||Qatar Petroleum Participates in Geosciences Expo ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Qatar Petroleum (QP) is taking part in the 11th Middle East Geosciences Conference and Exhibition (GEO 2014), currently in progress at the Bahrain International ...|
|Mar 11 2014||IMF Pegs Qatar's Growth to 6% in 2014 ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The International Monetary Fund (IMF) expects Qatar's Gross Domestic Product (GDP) growth to stay around 6% in 2014 with a positive short and medium-term economic ...|
|Mar 11 2014||Kuwait - KSE Trading Activities End on Red Board ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Kuwait Stock Exchange (KSE) ended Monday trading in red zone with the price index down by 2.05 points reaching 456.21 points, and the weighted index down by 2.05 points, ...|
|Mar 11 2014||Qatar Stock Exchange Up 0.59% ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Qatar Exchange pursued its upswing trend on Monday adding 68.45 points (0.59%) to advance to 11,710.49 points from 11,642.04 on Sunday.
The volume of the shares ...|
|Mar 11 2014||IMF Sees Real Deflation Risk Eurozone ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The chief economist of International Monetary Fund (IMF) Olivier Blanchard thinks the deflation risk in the Eurozone is real, a German newspaper reported.
|Mar 11 2014||Bank of Japan Maintains Monetary Policy ,Qatar News Agency|
|(MENAFN - Qatar News Agency) The Bank of Japan decided Tuesday to maintain its current ultraeasy monetary policy and left unchanged its assessment of the domestic economy for the sixth consecutive ...|
|Mar 11 2014||Saudi Alhokair Co to sell Islamic bond ,MENAFN|
|(MENAFN) Fawaz Abdulaziz Alhokair Co, the Saudi retailer which franchises brands such as Zara and Marks and Spencer in the Kingdom, plans to acquire 3-5 targets in the United States and the United ...|
|Mar 11 2014||'Neighbors' pits party-over against party-on ,Arab Times|
|(MENAFN - Arab Times) It's OK to grow up. Even Seth Rogen says so. As a married former party guy transitioning into suburban parenthood, Rogen wages war with the frat house next door in the raucous ...|
|Mar 11 2014||Actor's dry wit, cheerful profanity lift 'Budapest' ,Arab Times|
|(MENAFN - Arab Times) One of the many surprises in Wes Anderson's rich, layered and quirkily entertaining new film, "The Grand Budapest Hotel," is the emergence of a new comic actor, one with ...|