RIYADH: Saudi Arabia’s insurance sector surged 24 percent in gross written premiums to SR15.12 billion ($4.03 billion) in the second quarter compared to SR12.17 billion in the year-ago period.
According to the Saudi Central Bank, also known as SAMA, health insurance was the dominant line of business in the sector during that term.
Health insurance accounted for the largest share of total GWPs in the second quarter at 59 percent.
The category grew 30 percent in GWPs to SR8.8 billion during the period under review.
Motor insurance, which accounted for 21 percent of total GWP, came a close second at SR3.12 billion.
The category grew about 43 percent in GWPs from SR2.12 billion in the second quarter of 2022.
Engineering insurance, a specialized form tailored to construction, engineering projects and heavy machinery operations, exhibited remarkable growth, surging 94 percent and amassed SR507 million, despite its relatively small market share.
The launch of the authority marks the latest step taken by the Kingdom to regulate, supervise, control, support and enhance the Saudi insurance sector.
Adel Al-Eisa, Media spokesperson for Insurance Companies in Saudi Arabia
According to Saudi-owned Bupa Arabia, the two main factors propelling the growth of health insurance in the Kingdom were the rising number of insured individuals and the advent of medical inflation.
The health insurance company, in its second quarter report, found that the total number of insured people reached 11.8 million in the first half, up from 10.4 million in the same period the previous year.
Out of the total insured in the first half, Saudi nationals hiked 8 percent to 4.3 million compared to the corresponding period last year.
The number of insured expatriates, on the other hand, grew 4 percent to 7.6 million.
As per the International Monetary Fund, the reduction in overall unemployment in Saudi Arabia to 4.8 percent by the end of 2022, down from 9 percent during the COVID-19 pandemic, can be attributed to a surge in labor force participation.
This reduction results from the increased presence of Saudi workers in the private sector and a rebound in the number of expatriate workers, particularly in the construction and agricultural sectors, surpassing the levels seen before the onset of the pandemic.
According to the General Authority of Statistics, the unemployment rate in the Kingdom recorded 4.9 percent in the second quarter.
FASTFACTS
● The total number of insured people reached 11.8 million in the first half, up from 10.4 million in the same period the previous year.
● The Bupa Arabia report notes that the normal medical inflation in Saudi Arabia historically maintained an average rate of around 5 to 6 percent.
● Bupa Arabia identified several key drivers of medical inflation, including normal inflation, delayed pandemic-related inflation and new forms of illness, such as the flu.
In terms of employment’s impact on health insurance, it is essential to note that the Cooperative Health Insurance Law mandates that employers must provide medical coverage to their employees and their families.
The second component contributing to the growth of the health insurance sector was medical inflation.
The Bupa Arabia report identifies several key drivers of medical inflation, including normal inflation, delayed pandemic-related inflation and new forms of illness, such as the flu.
Normal medical inflation represents the typical yearly increase in the costs of medical goods and services.
It represents the rate at which medical expenses tend to rise annually under normal economic and healthcare conditions.
The report notes that the normal medical inflation in Saudi Arabia historically maintained an average rate of around 5 to 6 percent.
However, 2020 witnessed a remarkable shift due to the COVID-19 pandemic. During this year, medical inflation fell by 7.4 percent.
This downturn primarily stemmed from individuals postponing necessary medical treatments and procedures as the pandemic unfolded, creating a backlog of deferred claims.
The net result was that deferred claims in 2020 fell by 13.2 percent. The effect of this continued into 2021, raising medical inflation to 15 percent.
Another key factor contributing to the rise in medical inflation in 2021 was Article 11 within the Cooperative Health Insurance Regulations.
This stipulates that individuals covered by cooperative health insurance providers are entitled to medical services from government facilities, with the onus placed on the former.
Policyholders generally opt for private health facilities to avoid the extended waiting times experienced in public clinics.
Nevertheless, there are circumstances under which policyholders favor public medical care.
For instance, in smaller cities, the quality of private healthcare may not match that of public service; hence, patients may opt for the latter.
This arrangement burdened medical costs, contributing an additional 1.1 percent to the total medical inflation in 2021, bringing it to a total of 22.1 percent.
The fourth factor highlighted in the report was the emergence of the “New Norm Flu” — a new strain of influenza, which posed a significant challenge.
Insurance companies had to factor it into their calculations, contributing 3.5 percent to medical inflation in 2022.
Additionally, there were enhancements made to medical insurance, encompassing additional services and incorporating new elements into private coverage.
These improvements, while beneficial for policyholders, pushed medical inflation further.
As the cost of medical goods and services continues to surge, it places added pressure on private insurance companies to adjust their pricing and coverage options.
In response to these challenges, many countries, including Saudi Arabia, have recognized the need for regulatory oversight and intervention.
Creating an independent regulator for the insurance industry was a strategic move aimed at mitigating the adverse effects of soaring medical inflation.
This regulatory body works to ensure fair practices and cost control within the private insurance sector, ultimately striving to strike a balance between the interests of policyholders and the sustainability of private insurance companies in the face of mounting healthcare costs.
In August, the Saudi Council of Ministers approved the Saudi Insurance Authority — an entity that will regulate the sector and protect the policyholders’ interests.
Adel Al-Eisa, media spokesperson for Insurance Companies in Saudi Arabia, told Arab News last month that the cabinet’s decision to institute the SIA demonstrates the Kingdom’s dedication to cultivating a top-tier insurance sector, distinguished by its adherence to best practices and global standards.
“The launch of the Authority marks the latest step taken by the Kingdom to regulate, supervise, control, support and enhance the Saudi insurance sector and enhancing its effectiveness,” Al-Eisa said.
The new entity is expected to commence operations by the end of November.
