The UAE Medical Insurance Sector is Booming

The UAE Insurance Authority recently released its Annual Statistics Report for 2014, which is the clearest indication yet of how fast the UAE health insurance sector is growing. Here are some highlights from the report:  

Total premiums collected increase by 14%

The UAE insurance sector reached AED 33.5 billion in premiums in 2014, a growth rate of 13.7% over 2013. Within the overall insurance sector, non-life insurance continued to dominate with premiums collected reaching AED 24.9 billion compared to AED 22.5 billion in 2013.

Medical insurance sector has grown by 22% over the last four years

Medical insurance accounted for 44.5% of total non-life insurance premiums, reaching AED 11.1 billion in 2014, a growth rate of almost 12% after having grown by 52.3% in 2013. Over the last four years (2010-2014), the medical insurance sector has grown at a compounded annual growth rate (CAGR) of 22%. The growth has been led by foreign companies, which have seen premiums collected rise at a CAGR of 29% during the last four years to reach AED 2.4 billion in 2014. However, the sector is still dominated by local companies, which collected AED 8.7 billion in 2014 compared to AED 4.1 billion in 2011, a CAGR of 20.6%.

Outlook very promising

The medical insurance sector will continue its trend of strong growth in 2015 and 2016. This is mainly driven by the Dubai Health Insurance Law, which makes medical coverage mandatory for the emirate’s residents. Other factors include rising customer awareness and demand for insurance products, along with rising healthcare costs. The rollout of compulsory medical insurance in Dubai is expected to be completed by 2016, bringing the total number of covered individuals in the medical insurance sector to 4 million from 1.5 million.

Growth still impressive albeit below historical level

After the robust outperformance in 2012, the growth rate for the foreign insurance companies such as AXA, Aetna and Bupa has been slightly below their local counterparts in the last two years. While the national insurance companies ceded market share to foreign insurance providers between 2010 and 2012, they have regained some of it over the last two years. Overall, local insurance companies such as Daman, ADNIC, Orient Insurance and Oman Insurance account for almost 79% of insurance premiums.

Health insurance growth rate in the UAE

Group insurance driving growth in policy issuance

Within the medical insurance segment, a total of 636,804 policies were issued in 2014, a stupendous growth of more than 50% over 422,710 policies issued in 2013. This growth was driven by the group insurance segment, which accounted for 41% of total policies issued in 2014 compared to just 21% in 2013. Thus, this segment saw almost three times as many policies issued in 2014 against the previous year. The number of individual health insurance policies also grew impressively by 11% in the year, although the growth slowed down compared to 2013, when it grew by 26%.

Health insurance policies written in the UAE

Loss ratio remains below 100% but is creeping upwards

In basic terms, the total loss ratio for an insurance company is the amount of claims paid versus the premium it received. Loss ratios in 2014 stood at 88%, whereas this figure was 61% in 2009. This can be largely attributed to local insurance companies that have seen their loss ratios deteriorate from 60% in 2009 to 90% in 2014.

The extent of deterioration has been less for foreign companies, which had comparable figures of 64% and 79% in 2009 and 2014, respectively. Overall, the total amount of claims paid by the health insurance sector in 2014 was a staggering AED 9 billion. This is 3.5 times the amount paid out in 2009!

Medical insurance loss claims ratio

Premiums expected to rise

The average premium per policy is expected to rise by 10% to 20% this year as insurers try to catch up with rising healthcare costs, which have risen by 40% over the last three years. The cost of healthcare has in part been affected by health insurance abuse, which was estimated to total AED 3.67 billion in 2013. Furthermore, as insurance premiums have lagged behind healthcare costs, it has prompted people to seek medical assistance even for the slightest of inconveniences. Rising premium costs are being countered by the intense competition within the UAE insurance space. Given that group policies dominate the medical insurance sector, the competition in this segment is intense and the necessity to gain market share frequently prompts insurance providers in the UAE to give lower quotes.

Related articles:

Understanding Medical Insurance Deductibles, Co-Insurance and Co-Pays

Why the Track Record of Your Insurance Company Is Important

Everything You Need to Know About Maternity Cover in the UAE