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Home to the region's most dynamic insurance industry

Article - October 15, 2013
Intrinsically linked to the development of healthcare in Saudi Arabia, the insurance industry is growing as more people understand the benefits of risk protection that Sharia-compliant takaful insurance offers
GROSS WRITTEN PREMIUMS (GWP) IN SAUDI ARABIA ROSE 147 PER CENT BETWEEN 2007 AND 2012 TO REACH ALMOST £1.5 BILLION
Medical insurance is an important opportunity for private companies to engage in the healthcare sector. In Saudi Arabia, there is a strong link between insurance and healthcare, as insurance only began to develop significantly after the Saudi Arabian Monetary Agency (SAMA) required mandatory health insurance for expatriate workers in 2006. 
 
Seven years later, health insurance continues to account for over 60 per cent of all premiums, which reached £3.5 billion in 2012. Industry experts expect further growth in this area to be driven by increased trust in and awareness of the benefits of health insurance among the Saudi population, as well as the inclusion of further groups – such as all private sector workers, Saudis travelling abroad and short-term visitors to the kingdom – on the list of the health insured. The ultimate goal is to reach 11 million insured. 
 
The institutions that oversee health insurance are SAMA, the regulator, and the Council of Cooperative Health Insurance (CCHI), which focuses specifically on the 28 companies that provide health insurance services, the third-party administrators in this sector and the more than 3,000 healthcare providers active in the kingdom. 
 
CCHI’s mission is both to serve the interests of the medically insured and to further the understanding of cooperative health insurance through initiatives such as the Saudi Health Insurance Bus – an IT project that aims to standardise and digitalise health insurance. 
 
Reflecting on the increasing role of technology in healthcare, Dr Abdullah Al-Sharif, the Secretary General of CCHI, notes: “Quality, safety and efficiency are key performance indicators in any healthcare institution. A healthcare system needs to take control of three main problems, which are waste, abuse and fraud. These aspects cannot be completely eliminated, but can be minimised. IT solutions for healthcare services at the hospital, regional and national levels can achieve just that: minimising these problems.”
 
Dr Al-Sharif goes on to mention that well-trained staff is equally as important to the sector, a belief that is shared by Abdullah Al-Znytan, Managing Director of Weqaya Takaful Insurance and Reinsurance Company, one of the newest and most dynamic insurance companies in Saudi Arabia. 
 
Established in 2009 by a consortium of four investment banks from Kuwait and Saudi Arabia, Weqaya offers a gamut of services ranging from health insurance to complete packages for motor and protection and savings (life) insurance, and has been voted repeatedly as having the best work environment in the country.  
 
Sensitive to the needs of the Saudi society, Weqaya launched such innovative pilot projects as the recruiting of Saudi students with high grades, who were enrolled in the Weqaya Brand Ambassador programme, trained in insurance and compensated based on their performance at school and on the job. 
 
“The project is still in the works, but we believe that, when we launch it officially, it could become popular with Saudi female students, who would thus benefit from learning practical skills while still at university. The programme aims to also train and certify the students as insurance representatives, which will make them more attractive to potential employers when they enter the job market,” he says. 

“The private sector is becoming extremely active on investments within the healthcare market”

Dr Abdullah Al-Sharif, Secretary General of CCHI 
Overall, Saudi Arabia’s insurance sector is not only the largest in the region, pitching in more than half of the total global takaful (Sharia-compliant insurance) contributions; it is also the fastest growing in the region, posting a total increase in gross written premiums (GWP) of 147 per cent between 2007 and 2012, reaching nearly £1.5 billion. While the average GWP growth in the GCC was a respectable 16.6 per cent in the same period, in Saudi Arabia it was closer to 21 per cent. 
 
These positive trends are compounded by the terrifically low penetration rate, which still stands at less than 1 per cent (to put this into perspective, the average global insurance penetration is 6.6 per cent). Such low penetration coupled with the government’s higher budget allocation for infrastructure projects – for which engineering insurance is required – spells out enormous potential for the sector.
 
One of the principle reasons why insurance is not as commonplace in countries like Saudi Arabia is because until fairly recently, it was viewed with suspicion. “However, with the new government structure and regulation on sustained enforcement, cooperative and takaful insurance – which comply with Sharia law – we have managed to make some headway,” explains Mr Al-Znytan. 
 
In the early to mid-2000s, when motor and health insurance were made compulsory, the industry began to experience its first boom. Nevertheless, Mr Al-Znytan recalls that insurance did not catch on the way it was intended to. 
 
“I remember when companies were first required to give medical insurance to their employees, they dealt with it like tax that they have to pay for renewing their personnel’s papers. They would look for the cheapest option and even have an agreement with the insurance company to just handle the paperwork and not get the actual medical insurance card and the benefits the card entailed. 
 
“Over time, the employers realised that they only needed to add a little more to what they were paying to get actual benefits. This trend has been such that they are now becoming increasingly demanding when it comes to features and benefits, thus paving the way for a more competitive insurance market.”
 
The general public, too, have caught on to the importance of insurance and are increasingly looking to protect themselves from risk. “Because people get a practical sense of how insurance can help them, they begin to opt for wider coverage,” says Weqaya’s managing director.
 
Because takaful insurance is more of a cooperative type of system wherein profits are not its sole purpose, the company looks to investments for profits – a logical move given the fact Weqaya was founded by investment banks. 
 
“There is no way to make a profit through underwriting,” says Mr Al-Znytan. “We generate huge profits from investments”.

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