“It is unfortunate that citizens don’t show much interest in non-mandatory insurance,” says Tariq Al-Fayez, chairman and CEO of Elite Reinsurance.
His remarks come at a time when Saudi Arabia and the UAE are emerging as the two biggest markets in the region for the insurance industry.
Al-Fayez was recently honored as the most distinguished CEO of a fast-growing company in the Middle East at a major awards ceremony organized by a high-profile publishing group.
"The citizens are not aware of the importance of the health insurance yet," said Al-Fayez.
He said that although some employees receive health insurance benefits, many citizens are still forced to wait in long lines to be treated or to find a hospital bed as they do not have coverage.
“From a humanitarian viewpoint, insurance ensures equality among people — especially in the most important field, health care,” Al-Fayez pointed out.
He also highlighted the growing role of reinsurance firms in an industry that involves significant amount of financial risks and tough competition.
His company, launched three years ago, is also expanding its presence in the market.
In a reinsurance plan, an insurance provider covers itself against its own potential losses by buying a policy through another insurer, or re-insurer.
Reinsurance is insurance that is purchased by an insurance company from another insurance company (re-insurer) as a means of risk management.
The re-insurer and the insurer enter into a reinsurance agreement, which details the conditions upon which the re-insurer would pay the insurer's losses (in terms of excess of loss or proportional to loss).
The re-insurer is paid a reinsurance premium by the insurer, and the insurer issues insurance policies to its own policyholders.
The main reason for insurers to buy reinsurance is to transfer risk from the insurer to the re-insurer, but reinsurance has various other functions too.
For example, assume an insurer sells 1,000 policies, each with a $1 million policy limit. Theoretically, the insurer could lose $1 million on each policy — totaling up to $1 billion. So it may be advisable to pass some risk to a reinsurance company to reduce the insurer's exposure to risk.
Al-Fayez added: "Internationally it is not the client’s mission to address insurance companies directly. It has to be through brokerages.”
In the Kingdom too, he said the brokerages and insurance companies should prepare for such concepts.
He said the brokerage representative play the role of a mediator between the client who seeks lowest insurance policies while the insurance company aims at high insurance policies with the lowest coverage.
"It is essential to understand that a client makes a commitment in an insurance policy. But the details and conditions can be ambiguous to a layman," said Al-Fayez, adding that insurance brokers could play a meaningful role in raising awareness.
They should serve as a strong link between the client and the insurance company. They should study a client’s needs and help them to compare price lists so that receive the best offers and policies, he said.
Al-Fayez added: “Sometimes the client is the one who pays the price as many insurance agents don't have sufficient information. It is also possible that the client is usually either from the human resources or financial department, who has limited information and experience.
He said that clients’ interests can be protected only by insurance experts who have wide knowledge of industry trends.
The concept of insurance, as Al-Fayez sees it, is very essential for the Kingdom now that it is in the World Trade Organization.
"With inflation even hitting the health care sector, it is becoming difficult for people to pay for treatment. Therefore, health insurance is the best option," said Al-Fayez.
"Worldwide, when the private sector handles hospitals, it reduces the cost," he said.
"When there is a comprehensive system at hospitals starting from the doctor to the small procedures, the insurance will only provide for critical examinations and investigations. In government hospitals, however, when a patient complains about some ailment, the doctor would request all kinds of tests even if they are not directly linked to the complaint," said Al-Fayez.
Health insurance will uphold the dignity of the citizen, he stressed.
“Should there be shortage of beds in one of the major government hospitals, insurance schemes will enable the citizen to go to any private hospital, which will eventually turn all hospitals to privatization,” he explained.
Al-Fayez, however, stressed the need to adopt efficient calculations and methods in fixing the rates. He regretted the delay in implementing mandatory health insurance schemes.
“There are 17 million government employees and retired people who are not insured. With an average of SR1,000 per person, insurance companies might have missed out on SR170 billion,” said Al-Fayez.
On the other hand, he said health insurance has been made mandatory for the private sector as a humanitarian step.
He said that although some greedy businessmen tried to reduce those benefits by minimizing the services offered and cutting costs authorities had halted such manipulative activities.
