Governments in the GCC are increasingly adopting compulsory healthcare insurance schemes to alleviate the economic burden of healthcare services. It is being adopted in Saudi and some of the UAE emirates with plans to launch mandatory health insurance schemes have started to materialise in Bahrain and Oman while Qatar is mulling over the best means to head on.

Upon this, health insurance portfolio has grown to account for around 50% of the region’s GWP, the largest line of business in the GCC. Considering its size, the results of health insurance business have started to influence the markets’ overall performance. Commenting on the development of this line of business, Allianz Partners MEA & Nextcare CEO Christian Gregorowicz said that health insurance has been changing the shape of the insurance industry in the region with some markets reaching a certain maturity stage.

“The basic healthcare insurance product is set by the regulator, however; markets have evolved requesting additional benefits, wider network and more developed offerings, which has contributed to the development of these markets.” Still, profitability of these products is a main challenge in the region where some insurers write health insurance to expand their portfolio at the expense of profitability, he said. “Insurance companies are doing better compared to the past but still in some cases are chasing market share. Going forward, they need to become more technical when writing business.” Improving profitability of health insurance: More visibility on the performance of the healthcare line is required in order to improve its profitability, said Mr Gregorowicz.

“The balance sheets of insurance companies currently do not reflect their line-by-line performance.” He called regulators to enforce better transparency for each branch. “Knowing how insurance companies are writing business would clarify what is potentially influencing their results. This way, the profitability issue will be addressed to ensure that players write business with enhanced margins and not for the sake of a larger market share.” Being a low-severity line enables insurers to attract premiums without running a big risk; therefore, some insurers build volumes by writing health business potentially at a loss knowing that they can manage it, he said. “Though profit margins are thin compared to other lines, health insurance can be profitable as long as prudent underwriting is followed. It has been profitable for us.” Commenting on the diversified business environment in the region: The GCC region cannot be perceived as a single block. Every market requires a thorough market segmentation and deep analysis to demographic, said Mr Gregorowicz.

“Regulations also vary from one market to another. Even in a single market such as the UAE, each emirate has its own set of regulations. There is a high level of cooperation and coordination among regulators and the markets but eventually regulation and products vary from one market to another.” Rising role of technology The use of technology has taken a new level in the region. Players have started to embrace new tools either for approaching new social segments (especially millennials), streamline their processes (such as claims handling) and offer smoother customer journey in general. Health insurance, in particular, has been rapidly adopting new technology. Being a high-frequency low-severity line of business with lots of claims requires big staff to manage health insurance.

“Therefore, technology is increasingly becoming an integral part of the provision of healthcare services and this is creating lots of changes,” said Mr Gregorowicz. Insuretech has enhanced the various facets of the processes in areas of distribution, claims management, data analytics and detecting fraud, he noted. “This development benefits our insurance markets. True there is still a room to expand in using technology but I think we are on the right track.” He observed that there is a well-organised infrastructure for technology in the region. “Further, the regulators understand the necessity of technology and are pushing more parties to adopt it. However, we are still in a nascent stage as we have data but don’t possess proper analytics to influence regulation making. We are not fully utilising the available data.” 2020, continuation of the previous year: Last year was satisfactory for Nextcare though margins have further eroded and business environment was more challenging compared to previous years, said Mr Gregorowicz.

“We had to deploy additional resources and exert more efforts to meet our goals. This includes developing additional services and products to retain clients and attract new ones. We also raised the pace of investment in technology and digitised more services to become closer to clients and face competition.” It is not going to be easier in 2020, he observed. “Therefore, we need to buckle up for a bumpy road ahead. We will continue to grow but challenges remain.” However, he added that the GCC healthcare services and health insurance premiums will continue to drive growth of insurance business in the future. “There is no slowdown in health insurance business. Growth of health insurance will surpass the economic growth. Healthcare services are improving in the region and more services are being provided compared to the past. This means more growth is in the pipeline. To us, there will be still more interesting opportunities to help us continue growing.” Commenting on the M&A progress in the GCC region: At the provider level, there will be more consolidation in the GCC region, said Mr Gregorowicz. “It started in the past three years and will continue with a faster pace going forward. Some facilities are expected to cease operations while others seek to merge in order to be able to compete with larger groups.”

Source: Interview conducted by Middle East Insurance Review | January 2020