Surge in Medical Insurance

Historically Insurance has been in existence for over three centuries in this world. Due to its enormous growth, it has been classified into various classes depending upon the type and nature of the risk involved. The major traditional classes of insurances are medical, motor, property & marine. It is found that medical together with motor constitute almost half of the insurance portfolio of the total insurance business. These classes of insurance are also known as attrition class of business as losses do occur with regular frequency. Medical insurance is more prone to attrition than any other class of insurance.

In Saudi Arabia, insurance sector has been poised for rapid growth and the major growth will be in the area of health insurance since the government has started applying cooperative health insurance scheme to expatriates working in the private sector. This scheme is being applied to expatriate workers and their families in three phases. In the first phase, companies which employ 500 or more employees are obliged to implement the scheme for their expatriate staff. In the second phase, the scheme is applied to expatriate employees in companies employing more than 100 foreigners. In the third phase, it is applied to all companies and all expatriates including domestic servants. Lately, the government has decided that expatriate workers must have health insurance coverage for the application and renewal of their Iqamas (resident permits). This decision has given a fresh boost to the Kingdom's health insurance sector.

The cooperative health insurance scheme was approved by the Council of Ministers in 1999 with the objective of regulating the mandatory medical insurance and to reduce government expenditure in the health sector. The overall average expenditure in the Saudi health sector amounts to SR 37.4 billion per year, of which 29.9 billion is government expenditure and the remaining SR 7.5 billion is accounted for by the private sector.

After implementing the cooperative health insurance scheme, medical insurance premiums is set to grow by at least 40 percent and it is expected that the newly established insurance companies will initially concentrate on health and motor insurance markets to carve out a bigger share.



In Saudi Arabia, medical insurance is being sold for almost over half a century. Until recently, the National Company for Cooperative Insurance (NCCI) had a monopoly in the market procuring a bigger share of the premiums. There were also at least 70 companies active in the market operating through offshore licensing arrangements with foreign companies. Now NCCI would face hard competition since a number of new companies licensed under the Cooperative Insurance Control Regulation has already come up and many more are in the offing. So far, at least new 13 companies have been licensed to operate in the Kingdom.

Medical insurance in the Kingdom is still in evolutionary process and it may take some more time till it stabilizes. In the past, because of the absence of regulatory body, many hospitals and clinics suffered a lot due to the default of some of insurance providers. A number of insurance firms operating in the medical insurance sector were closed down resulting in heavy loss by the hospitals and clinics which were offering medical services under the insurance coverage by these companies. The current regulations will protect the interest of all parties involved in the health insurance sector.

Another major problem facing the hospitals is the evaluation process of claims by the insurance company doctors, who frequently refused to accept claims provided by the hospital doctors. This disagreement between the doctors of hospitals and insurance companies ultimately resulted in the suffering of the patients. The insurance doctors need to trust the hospital doctors for providing better service to patients. The hospital doctors some times end-up being dictated by the insurance doctors which affect their professional efficiency.

There are many companies specializing in the health insurance in Saudi Arabia. For large groups, it is easy to get insurance coverage. However, if an individual wants to buy medical insurance, he is left with very limited choices and always finds it very difficult to get the right coverage. Some of the staff, who are on deputation here have their own international insurance coverage from the companies in their own country. The cost of health insurance coverage is also high. The cost for an individual average coverage ranges from SR 800 to SR 4,500 a year. Inspite of high cost of insurance an individual may not be able to get the coverage as per his requirements.

The mandatory health insurance coverage is standardized to make the insurance uniform and it has certain inherent advantages like compulsory coverage to a limit of SR. 250,000, dental coverage, vaccinations as per the Ministry of Health, optical and maternity medical facilities. The number of exclusions are less and well defined. The basic room requirement is semi-private room. The difficult area is the deductible amount which is 20% of the claims and is subject to a maximum of SR 100. In this context, customers have ended up paying up to SR 300 due to lack of understanding on various parties involved. However, as the scheme progresses further, the awareness will increase among the customers. Insurance companies have already found a way to overcome this deductible issue by issuing policies with fixed deductible amount. In the mandatory health scheme, there is worldwide exclusion unless the treatment is emergency in nature. Wives and children are included under the current definition of dependents. However parents and other dependents cannot be insured under the scheme.
Most importantly, customers should realize that everything is not insurable and there are always some lacuna in the insurance. Too often, it has been found that a customer either does not get the expected service owing to the fact that doctor does not prescribe the proper medicine needed by the patient since certain brands of drugs are not allowed by some insurance companies. Patients also face problems when they are required to seek approval for even small medical tests which consume much time of the patient and even after a long wait, patients are denied particular tests. The least a customer can do it to become more knowledgeable about his coverage and try to adopt the commercial principle “Caveat Emptor”

Courtesy : Mr Mohammed Sadullah Khan, an MBA, Fellow of Insurance Institute of India and an Associate of Chartered Insurance Institute of U.K., with more than 20 years of experience in the insurance industry — 12 of which have been in Saudi Arabia, is experienced in all classes of general insurance with special emphasis on property, medical, motor and bancassurance.