RIYADH, 19 April 2003 — The Kingdom’s insurance sector is to be opened up for foreign investment, high-level sources at the General Investment Authority (GIA) told Asharq Al-Awsat, a sister publication of Arab News.
“The insurance sector will be taken off the negative list and subsequently be open for direct investment from foreign companies,” the sources told the Arabic daily.
However, the sources said that the new insurance law, which is to be endorsed by the Council of Ministers shortly, would determine limits for investment in the sector.
Investors are eagerly waiting for the Health Ministry to issue the executive bylaws of the insurance scheme.
Major national and international insurance companies are vying for their share in the Kingdom’s booming insurance market. The medical insurance sector alone expects a profit of SR50 billion ($13.3 billion) within the next five years.
The newly introduced cooperative health insurance scheme will cover seven million expatriate workers and their families in the first phase.
According to the draft regulations approved by the Cabinet, employers will pay nearly 90 percent of the premium, while employees will bear 10 percent or less.
The draft insurance law also authorized the health minister to provide health services to pilgrims during the Haj season.
More than two million people including about 1.3 million from abroad, take part in the annual pilgrimage.
The scheme aims to ease the financial burden on the government, which offers free medical services to some 22 million people, including millions of foreigners.
A number of international insurance companies have entered into negotiations with Saudi partners to open their offices in the Kingdom. The Supreme Economic Council, chaired by Crown Prince Abdullah, has said that foreign investment in insurance services will be allowed once the new insurance law is approved.
As many as 189 hospitals in various parts of the Kingdom are expected to take part in the cooperative health insurance program.
Dr. Abdul Rahman Al-Homaidhy, adviser to the health minister, said the program would be implemented in private companies with more than 500 employees in the first phase.
“The prospects for health insurance in the country are good,” Homaidhy said. “The participation of government hospitals in the program will improve their financial situation and services.”
However, private hospitals have voiced concern over allowing government-run health institutions to provide treatment by charging fees. They say that the move will trigger a price war that in turn will compromise the quality of health care in the Kingdom.
They also argue that the move contravenes the country’s privatization drive at a time when the private sector is being urged to play a more active role in the national economy.
A simmering row involving King Faisal Specialist Hospital (KFSH) and private hospitals in Jeddah over the past few months has seen the latter rejecting the idea of government hospitals treating people ready to pay.
Private hospital executives argue that by opening its clinics to insurance patients, especially expatriates, KFSH is negating the very goal for which it was established in the first place — providing free health care to citizens.
If the trend is allowed to continue by drawing other public hospitals to competition, this could affect the standard of health care in the country and at the same time scare off future private investments in the sector, they warn.
Dr. Sobhi Batterji, chairman of the Saudi German Hospitals Group, said since KFSH receives financial support from the government, it should confine itself to providing only specialized services not available at private hospitals.
KFSH was charging its insurance patients less than what private hospitals charged for specialist treatment. As an example, he cited open-heart surgery, for which KFSH charges half the price at SGH.
“If such a trend is allowed to continue, private hospitals will be forced to close down their specialist sections. The effect on health services could be devastating if these hospitals are relegated to the status of polyclinics. We will then have long waiting-lists of patients for specialist treatment, and at least some of them will be forced to seek treatment abroad,” Dr. Batterji said.
