Healthcare costs and insurance premiums in the Middle East are rising with the average annual increases now returning to pre-pandemic levels. Middle East Insurance Review spoke with AFIA Insurance Brokerage Services’ Mr Avinash Babur about the reasons for this surge.
Healthcare spending in the GCC is expected to reach $135.5bn in 2027, increasing by 5.4% per year from 2022, according to new research from financial advisory firm Alpen Capital.
A variety of factors are driving this trend, including deferred elective surgeries that were put on hold during the pandemic, the cost of new medical technologies, new research, a population that is gradually ageing and an increase in chronic lifestyles and critical diseases.
Backlog leads to a surge
Speaking with Middle East Insurance Review about the factors contributing to the rise in healthcare costs, AFIA Insurance Brokerage Services CEO Avinash Babur said, “The incease in elective surgeries, put on hold during the height of the pandemic, has undoubtedly contributed to an increase in health insurance premiums.
“The backlog of these procedures led to an uptick in claims, exerting upward pressure on premiums. This is a classic case of demand-supply dynamics. As healthcare utilisation increases, insurers need to recalibrate their risk models and pricing strategies, often leading to a rise in premiums.”
Medical costs per employee in the MEA region increased by 10.2% in 2021 and were expected to rise by 15% in 2022 and 13.8% in 2023, higher than the global average, according to the Mercer Marsh Benefits (MMB) study.
Health insurance premium rises
Speaking about the increase in the health insurance premiums in the Middle East, Mr Babur said, “During the three years of the pandemic, health insurance premiums in the UAE have seen a significant rise. This has been growing roughly 10% y-o-y. In 2021, the average premium for a comprehensive policy per person was AED4,110 ($1,119), which rose to AED4,710 in 2022 and further to AED5,440 in 2023.
“This consistent increase over the years has been due to multiple reasons. Medical inflation and the post-pandemic elective surgery uptake are two big reasons. However, another major reason is also because the pandemic put a big spotlight on the need for good healthcare systems and thus, an increased investment in new technologies and new medications.”
He said, “This trend of increased investments in healthcare has been observed across the region. While this is a good thing for the quality of healthcare, it has added to the costs of providing healthcare and, as a result, we are seeing a significant increase in the insurance premiums too.”
The MMB report found that insurance claims costs have also been impacted by delayed diagnosis of chronic and serious illnesses.
Insurance companies have also become more vigilant and demanding. They are asking customers, especially the new ones, to provide more details of their medical history including previous accidents and surgeries.
Medical inflation
Mr Babur said medical inflation has also impacted health insurance premiums in the Middle East. The trend suggests that medical inflation has been a consistent factor influencing health insurance premiums, contributing to the evolving dynamics of the insurance market in the UAE and beyond.
He said, “However, attributing the premium increase solely to medical inflation would be an oversimplification. Other factors have played a crucial role. Deferred surgeries, enhanced investments in improved healthcare have also contributed. For instance, the implementation of mandatory health insurance reforms in Dubai has significantly influenced international private medical insurance rates. These regulatory changes are reshaping the market as insurers and consumers alike come to terms with the new laws.”
Mr Babur said, “It is clear that the sudden rush of elective surgeries after the pandemic and the ongoing zoom of medical inflation has had a big role in the recent increase in health insurance premiums. But there are also other factors at play, like changes in health risks, increased healthcare investments and the ways people use healthcare.” M