Saudi health insurance market boosted by requirement for pilgrims' cover

Temporary policies taken out with religious visit visas to swell premiums by $800m, says Fitch

Comprehensive health insurance policies linked to visit visas for Saudi religious tourists have a maximum benefit of $27,000, says Fitch Ratings.  AFP

The health insurance market in Saudi Arabia is set to grow by about 8 per cent this year following the introduction of new health insurance policies linked to visas for visiting pilgrims, according to Fitch Ratings.

Although health insurance companies in the kingdom will find profits remaining under pressure due to inflation in medical claims - which rose by 9 per cent in 2018 and is expected to climb by 8 per cent for 2019 according to insurers surveyed by Mercer Marsh - the new comprehensive policies that religious visitors will need to take out will provide a boost to business.

"These policies will be comprehensive, providing health coverage, including medical examinations and hospitalisation, for the duration of pilgrims’ visits to Saudi Arabia, with a maximum benefit of $27,000 per policy. We expect the policies to account for over $800 million of premiums and cover around 17 million people annually," the Fitch Ratings report on the Middle East healthcare insurance market said.

Health insurance is the dominant line of business in the Saudi Arabian insurance market, accounting for over half of total gross written premiums. The total amount of health insurance premiums written in Saudi Arabia in 2018 stood at about $3.5bn in 2018, the report said.

Compulsory health insurance for expat employees in the private sector became mandatory in 2006 and for private sector local workers in 2010. It was extended to families of residents working in the private sector in 2016. Despite this, the medical coverage ratio in the country currently stands at only about one-third of the population, with 3.5 million Saudi employees and dependents, and 7.6 million non-Saudi employees and dependents covered out of a total population of 33.7 million, meaning there is scope for much broader coverage.

The kingdom's health insurance market is also "highly concentrated", Fitch Ratings' report said.

"Health insurance is provided by 27 companies in the kingdom but the top two companies, Bupa Arabia and The Company For Cooperative Insurance (Tawuniya), wrote almost 70 per cent of the business in 2019. Their size and expertise give them a significant advantage in the market as they benefit from economies of scale. The other companies face a highly competitive environment with low profit margins," it added.

The health insurance market in the UAE has more limited growth opportunities, however, given that mandatory insurance was first introduced for all citizens and residents from 2005 and in Dubai over three phases between 2013-16. The UAE market is also much more fragmented, with 62 licensed insurance providers, 163 brokers and 26 third-party administrators.