With increases in medical costs easily outstripping inflation, what can be done to manage costs, increase affordability for all and build sustainable profits?
Medical inflation has long been an issue for the healthcare market in the MENA region, with medical costs increasing by approximately three times inflation.
Cigna MEA chief executive Jerome Droesch says there are a number of factors driving these high levels of inflation, with the cost of drugs chief among them.
“The cost rises we are experiencing is not going to slow down, and it is driven by many factors,” he says. “Some of these, such as the costs of new drugs and treatments, are increasing every year, and that is a massive cost [to the industry].”
Atnic Yilmaz, regional chief executive for Turkey, the Middle East and Africa at Howden, says the sector has also suffered from overuse in recent years, with premiums also rising as a result of an increase in the number of mandatory and workplace healthcare schemes.
“The health insurance sector faces a number of challenges, with a rapid growth in health insurance premiums due to both mandatory healthcare systems and employer-led healthcare plans over the recent years, but also unnecessary use of health services,” he says. “As a response to this trend, better use of digital technologies and data analytics will certainly help the industry to offer more affordable and sustainable insurance plans and solutions for its customers.”
Droesch says technology is the key to managing these costs and getting medical inflation under control, citing the example of how connected devices can measure a person’s condition and adjust medication accordingly, without the need for intervention by a medical professional.
This could even lead to a reduction in the likelihood of a medical emergency occurring, because the condition is being better managed by the correct dosage of medication.
Zurich International Life chief executive Walter Jopp agrees that technology is a vital tool, but says insurers also have an obligation to educate, not just to drive down costs, but also to improve the health of their customers.
“Insurers themselves have lots of work to do in terms of ensuring they become more efficient through better use of data, robotics and AI,” he says. “But we also have a responsibility to the market and to our customers to educate them so that customers are better informed about whether or not they need to go to the hospital or a doctor.”
Aftab Hasan, chairman of Risk Exchange at the DIFC and secretary general of IBG agrees: “Insurers need to play a major role in educating the customer that if they keep themselves fit and take measures to reduce stress, then it will also bring down the cost of their insurance.”
Profits Feel the Squeeze
A new report from Fitch has revealed that the ratings agency expects medical inflation and intense competition to keep squeezing profits for health insurers in the two largest markets in the Middle East, Saudi Arabia and the UAE.
Fitch said that this was reflected in the loss ratio jumping to 91% and 88% in 2019 and 2018, respectively, from 77% in 2017.
But Droesch says this is more than just an issue of profitability, it is also an ethical problem that needs solving.
“Can we accept living in a world where people are dying simply because they do not have access to healthcare?”, he asks. “We know that we have capacity to save lives, so can we accept that situation, or should we change it and make a system where everyone gets access to healthcare?”
Everyone should know the answer to that question.