Saudi Arabia's health insurance market is growing, but insurers will not capture the full value of that growth through pricing discipline alone, according to L.E.K. Consulting (LEK), an independent global strategy consultancy.
In an article on the firm’s website, titled “From reimbursement to provision: Saudi Arabia’s vertical integration window for health insurers”, LEK says that gross written premiums for private medical insurance nearly doubled between 2018 and 2023 in the kingdom, from $5.4bn to $10.4bn, and roughly one-third of the population now carries some form of private coverage.
“Yet, the kingdom’s insurers have captured remarkably little of this prize. Growth has flowed through their books rather than to their bottom line,” said the article written by Mr Andreas Buelow, Partner; Ms Pradnyesha Rode, Principal; and Mr Al Mahdi Tabia, senior manager, at LEK.
To capture more profits, the authors point to a 2019 amendment to the Private Health Institutions Law allows companies, including insurers, to own and operate clinics, diagnostics centres and hospitals for the first time.
Arguing the case for vertical integration by health insurers, the writers say that ownership generates new revenue beyond premiums, through consultation fees and diagnostic imaging and laboratory services, while shared administrative infrastructure lowers cost to serve. Vertical integration also closes the data loop: an insurer with real-time clinical data, not just claims data, can monitor billing integrity directly, identify at-risk members early and intervene before an episode escalates into an expensive admission.
The writers also mention three forces converging at once that would serve vertical integration:
1. Demand
Private medical insurance is projected to comprise approximately 35% of total healthcare spending by 2026, propelled by mandatory coverage for private-sector employees and expatriates and by widening benefit requirements from the Council of Health Insurance.
2. Regulation
The kingdom’s Vision 2030 strategy targets raising the private sector’s share of healthcare delivery from 40% to 65% by 2030, with privatisation plans covering about 290 hospitals and approximately 2,300 primary health centres.
3. Precedent
The first insurer-backed vehicles are already operating. Tawuniya’s Meena Health announced plans in 2024 to open 46-52 primary care centers by 2027 with a budget of SAR500m ($133m), and Bupa Arabia’s CareConnect launched its first clinics in 2025.
Consultation and diagnostics are the natural first moves
Outlining the pros and cons of pathways to vertical integration, the writers say that
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Consultation offers the lowest capital intensity and operational complexity, the lightest licensing requirements, an adequate supply of general practitioners and, critically, control of the point where most care episodes begin and referrals are made.
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Diagnostics is equipment-heavy but modular, can achieve higher EBITDA margins at scale and can attract radiology and laboratory staff with premium pay.
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Treatment carries the largest capital expenditure needs, hospital accreditation requirements and a shortage of tertiary consultants, while
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Post-treatment services are typically bundled with treatment and rarely stand alone.
Risks
The market is tilting in favor of movers, but executional risks separate value creation from value destruction. For example, insurers lack provider operating experience, from clinical supply chains to accreditation by the Saudi Central Board for Accreditation of Healthcare Institutions, and the capital intensity of fit-outs, equipment and start-up working capital is real.
Concluding, the writers say that vertical integration should be treated as a strategic capital allocation decision, not simply an operating expansion. Insurers that move early, sequence carefully and maintain strong governance will be better positioned to convert claims pressure into margin advantage.
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