Deductible and co-payments will become a norm in 2023

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Mustafa Vazayil, managing director at Gargash Insurance
Mustafa Vazayil, managing director at Gargash Insurance

Rising healthcare costs are the single biggest challenge for insurance companies and employers in the UAE

By Suneeti Ahuja-Kohli

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Published: Wed 28 Dec 2022, 10:54 AM

Last updated: Wed 14 Feb 2024, 3:37 PM

Rising healthcare benefit costs will pose a big challenge to the health insurance industry next year, said Mustafa O Vazayil, managing director at Gargash Insurance, in an interview with Khaleej Times. “The pandemic has disrupted supply chains, increased cost of production for various goods, and introduced several other challenges. This has increased inflationary pressures in economies, and it is bound to impact healthcare providers as well. Healthcare benefit costs in the UAE are expected to rise between 10 and 15 per cent in 2023.”

This is a global phenomenon with varying degrees of increase in costs across regions. Statistically, the global healthcare cost will be at its highest level in nearly 15 years, the 2023 Global Medical Trends survey stated. In Europe, healthcare costs are expected to rise by seven to eight per cent and in the MENA region, they will be up by more than 11 per cent. This effectively will translate into a higher insurance premium in the coming year. “Managing costs is the single biggest challenge for the healthcare industry post-pandemic in the UAE. As insurance costs go up, the claims costs also rise. This is impacting a good number of insurance companies’ bottom lines. It’s only up to a certain limit that companies can continue subsidising,” said Vazayil.

The UAE needs effective market regulations to discourage insurance companies from writing business at below costs. “In Saudi Arabia, for instance, the Saudi Central Bank (SAMA), which monitors the insurance sector as well, does not allow insurers to write businesses at below costs. The prices are mandatorily increased by the regulators. There is no such regulatory intervention in the UAE yet but sooner than later such steps may have to be taken to protect the market from collapsing,” noted Vazayil.

The escalating costs are also a major issue for the employers. Insurance, after all, is the biggest expense of employers after the salaries of staff. The best way to look at it is, perhaps, make the employees pay some part of insurance costs. A higher deductible or a higher percentage of co-payment is one of the ways to make the insured use the insurance more judiciously. I think different levels of deductibles and copays will become a norm in 2023. This will be in the interest of employees in the long term by ensuring continuity and affordability of medical insurance,” Vazayil added.

Misuse of insurance policies is also a concern and adds to the cost. “A lot of the insured tend to go straight to the specialists for their problems instead of following a tiered approach of going to a family doctor or a general physician first. Specialist consultations come at a cost. Moreover, there is also a practice to take consultations from different doctors. Why? The UAE offers excellent medical professionals, certified by the health authorities. This is a misuse of an insurance policy.” Talking about the likely trends in 2023, Vazayil points at the need of having some sort of portability in health insurance policies. “As the UAE becomes a global centre for experts and expatriates from around the world, portability of insurance policy will be an essential requirement. There is a growing demand for this but only a handful of international players provide portability. Getting an insurance cover becomes a real challenge for people above 50 who are either switching careers, seeking an early retirement, starting a new venture, or moving to greener pastures. Portability will be able to address this challenge.”

Gargash Insurance has a fairly large footprint in the employee medical insurance field and is recognised as one of the UAE’s leading brokers in providing insurance solutions. In 2023, the senior management plans to pave the way for higher growth trajectory of the company. “We are very excited for 2023. We have made some very senior appointments. We are revamping everything and looking at about 30 per cent growth in 2023,” Vazayil concluded.

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