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UAE’s insurers grapple with profitability issues

Dubai: Mandatory health insurance for all in Dubai has opened up new opportunities for the UAE’s insurers, but the industry still needs to confront the issue of having too many players chasing after business.

Japan, for example, has just over 20 insurers while the UAE has 60, which is way too many relative to actual requirements.

“If you look at the balance-sheets of these 60 insurance companies, you will find 15 to 20 are doing quality business, have a reasonable turnover and they make profit,” said Mohammad Iqbal Mankani, managing director of Dubai-based MIM Business Consultants. “They are stable companies, highly rated and professionally run. The rest are making a loss, [or] I don’t know what they are doing here.”

The situation certainly is no help for the beneficiaries and contrary to the general concept that the greater the competition, the better the benefits and rates for the insured. And if local insurers believe they can realise a windfall from Dubai’s move on health coverage, they better have a rethink. “Health insurance is not a profitable business,” said S.P. Saxena, a Dubai-based insurance consultant.

The increasing cost of healthcare in Dubai complicates the situation further. Insurers have raised premiums to try to cover the increasing cost of covering health care, and particularly on maternity and dental. “Many insurance companies will not give you this [health coverage],” Mankani said.

Patients have complained of the lack of insurance coverage when most needed. Doctors, in turn, have raised concerns over the slow pace of insurance approval for costly, but vital, treatment. In one such case, a cancer patient had to wait weeks before resuming her chemotherapy session because she exceeded the limit of treatments for that year.

Some insurance industry insiders in putting up their defence describe some doctors’ attitude as being ‘greedy’. “The first question they ask is ‘Are you paying or your insurance company?’,” said an insurance consultant. “If insurance is paying and you have a pain in the ankle, they will tell you to do ten X-rays.”

On the profit margins of insurers in the UAE and whether these would be close to the industry-wide 3 per cent on average in the US, Mankani said: “I don’t think they are making that level.”

As such, local insurers generate profits from certain lines. “There are two things to see in insurance profits — the frequency of the claim and the severity of the claim,” said an insurance agent. “Property-related insurance could be bringing good premiums to the industry, but whenever a claim happens, the severity could be very high. So whatever they profited over years could get wiped out in one go.”

In vehicle insurance and worker compensation, “the profit is not big, but is there,” the agent said.

More regulations on the way

The total size of insurance premiums paid in the UAE is estimated at Dh26 billion for 2013.

The UAE authorities are looking to regulate the working of the 60 insurance firms and nearly 300 brokers. The capital required to set up an insurance company is Dh100 million.

There are now stricter rules governing investments by insurance firms. “Insurance companies can’t invest more than a certain percentage in stock markets or real estate,” said Mohammad Iqbal Mankani of MIM Business Consultants.