Dubai Health Insurance Law Will Make Market Competitive

But experts assure that the new law will not wipe out smaller insurance firms from the market.



The Dubai government’s recently-passed mandatory health insurance law will make the market more competitive and will help boost employee productivity, according to experts.

“Dubai’s mandate making health insurance compulsory is a very positive step,” said Ashok Sardana, managing director, Continental Group.

“It will help provide for a better level of care for the residents of Dubai and will help the market grow.”

With the new law coming into effect in early 2014, many major local insurance firms and healthcare providers are ramping up their offers.

It has also spurred players like Abu Dhabi-based Al Noor Hospitals Group to expand into the Dubai market.

While Dubai’s insurance market is extremely competitive, with major players dominating the scene, Sardana said that the new law will not phase out the smaller players.

“The market is big enough for everyone,” he said.

“However, we will see big and established players benefit more as they will be able to provide a better quality of service and value due to the established infrastructure.”

Benefits To Outweigh Costs For Employers

According to the new law, employers will have to bear the costs of providing their staff with medical insurance. The Dubai Health Authority (DHA) has set a two-year deadline to roll-out the health insurance scheme across the emirate.

As per the law, companies with 1000 or more employees will have to cover their staff before the end of October 2014 while those with 100 to 999 employees have until the end of July 2015. Firms with less than 100 employees will need to provide health insurance to their staff before the end of June 2016.

All spouses, dependents and domestic workers will also have to be covered by June 2016, the DHA said.

It also assured the employers that such a move would only have a “minimum impact” in terms of cost.

“On an average, health insurance costs 1.5 per cent of the monthly salary. For example, if an employer pays Dhs10,000 per month in salaries, if he adds Dhs150 per month, it covers the cost of health insurance,” said Dr Haider Al Yousuf, director of Health Funding at DHA.

“This is a minimum impact, adequate benefit plan; clearly the benefits outweigh the minimum costs involved. The scheme protects both employers and employees from unforeseen health care costs that can arise out of an illness or an emergency.”

Sardana agreed that the compulsory health cover for employees will prove positive in the long-term.

“While employers who have previously not provided employees with health insurance will have to bear the cost they will benefit from a boost in productivity and better morale,” he said.

“It is a competitive market and I am sure we will see the insurance companies come out with affordable options while maintaining good benefits creating a win-win for both.”

The new law will also be beneficial in further utilising healthcare services in the country since hospitals will be able to widen their patient base to include lower income groups as well.

“At the moment our clients fall under the middle and upper class insurance categories,” said Salim Al Maamary, COO of Al Tadawi Medical Centre.

“But with health insurance being made mandatory by DHA, insurance companies will be encouraged to lower premiums which will enable us to take everyone on board.”

He said that mandatory health insurance will particularly benefit labourers due to the nature of their work.

“Judging from the service provider prospective it is a sense of security for patients to know that they are covered medically rather than being surprised with exorbitant medical bills when they most need it,” he said.

Growing Market

A Markaaz report released this year, revealed that compulsory health insurance has driven up the value of the GCC health insurance industry to $4.69 billion in terms of premium volumes.

Population growth and increased awareness of health issues have contributed further to the growth of the industry.

Despite robust growth rates in recent years, the report found that insurance penetration in the region is still low owing to the transient nature of expatriates and a lack of awareness.

The Gulf region has a market size of $16.3 billion in terms of premium volume but had an insurance penetration of just 1.14 per cent in 2012 as compared to the global average of 6.5 per cent.

However, this is gradually changing, the report said. The industry witnessed a compound annual growth rate (CAGR) of about 18 per cent between 2006 and 2012, compared to the global CAGR of just 4.37 per cent during the same period.

With strong potential for growth in the GCC, the report forecasts the insurance industry to be worth $28 billion by 2015 and touch $40 billion by 2017.

“The Gulf has always been an attractive market for medical insurance due to the strong expat population,” said Sardana.

“We do have a good selection of international providers already offering medical insurance products and we will continue to see more international companies entering the market.”