Any broker or intermediary who thought that Financial Services Authority (FSA) regulation was tough should take a look at what the authorities are doing in Saudi Arabia, Abu Dhabi and Dubai.
These three states, soon to be followed by the rest of the United Arab Emirates (UAE), as well as Bahrain, Kuwait, Qatar and Oman, are introducing healthcare regulation so strict, rigorous and all-encompassing that it makes the FSA looked like a floppy attempt at self-policing.
In Abu Dhabi, insurers report that if expats do not have an approved medical policy, they cannot get a visa or work permit, open a bank account, rent a house, or register children at the local school.
Brokers and insurers with serious designs on selling international private medical insurance (PMI) in these territories have little choice but to comply, or look for easier parts of the world to earn a living.
The main aim of the regulations is both to raise standards, and to push the cost of healthcare for expats firmly away from the state, and onto employers and individuals.
In January 2006, Saudi Arabia made health insurance compulsory for expat workers and stipulated minimum benefit requirements. Employers are responsible for providing cover to their staff, enforced by punishments including fines and a recruitment ban. Insurance must be sold by a locally-registered company, although foreign companies have been allowed to open a branch in the country.
In 2006, Abu Dhabi began implementing a new law insisting on compulsory health insurance for all expatriates, also with minimum benefit requirements.
The following January it set up a new regulatory body, the Health Authority for Abu Dhabi (HAAD). Any insurer or broker wishing to sell its plans in the emirate needs to be registered with HAAD. Employers are responsible for employees’ health cover, plus their spouses and up to three children under the age of 18.
In June, the Dubai Health Authority (DHA) announced its plans for mandatory health insurance, to be phased in from January 1,2009. Expats, residents and visitors will receive basic health insurance coverage, with expats and residents having to register with the primary healthcare centre of their choice.
Employers and sponsors will be responsible for paying for this insurance. Anybody wanting more than this basic cover will have the option to top up their policy – many insurers see this as an opportunity.
Every country has slightly differing rules, and will phase them in at a different pace. Insurers have to respond in a flexible way. Bupa, for example, has set up its own local insurance company in Saudi Arabia, Bupa Middle East, to sell products that comply with local minimum benefit levels.
In the UAE, it has partnered with the HAAD-registered Oman Insurance Company (OIC), which acts as insurer, risk carrier and administrator for all Bupa’s products in the region. But Bupa will still look after clients from the UK service centre in Brighton.
Insurers are still waiting for further details to be released in Dubai. A Bupa spokesperson says: “It is believed the DHA will be looking for all residents to register with them. This shouldn’t remove the need for private health insurance, because people still prefer choice over where they receive their treatment, and the expat population will want the option to have their treatment outside the UAE.”
Abu Dhabi has set down some of the stiffest laws, says Carl Carter, managing director of IMG Europe, an international PMI provider.
“Expats with a typical overseas medical plan won’t be able to get a work permit, because HAAD has set some pretty onerous terms for what must be covered, particularly on pre-existing conditions,” Carter says.
These terms can cause underwriting problems, and deter some insurers from entering the market. Carter adds: “The insurer must cover all pre-existing conditions. The underwriting safeguard is that you can rate each risk accordingly, based on the conditions disclosed, but some providers aren’t equipped to underwrite on a case-by-case basis.”
Insurers cannot impose any waiting period for pre-existing conditions if the customer has previously held the Government Healthcard, nor can they apply a personal medical exclusion to a sub-standard risk or condition. There is also no waiting period for maternity coverage, Carter says.
But it is still possible for an international medical insurer to profitably meet these criteria – IMG Europe has done it on its MediGlobal product, launched with nationally-licensed UAE insurer, Al Wathba National Insurance Company.
“This meets or exceeds the HAAD requirements, and is available to individuals as well as groups,” Carter says.
According to Carter, it is important that plans can be adapted to differing laws adopted throughout the emirate.
“It seems likely that Dubai will have different laws to Abu Dhabi,” Carter explains. “We will adapt coverage by issuing the relevant rider or endorsement. Crucially, our plan can also be sold both by brokers in the UAE and the UK.”
Saudi Arabia and Abu Dhabi have not just been introducing new legislation, they have also been rigidly enforcing it, says Andrew Apps, sales and business manager at Goodhealth Worldwide.
“They have been fining employers and refusing work permit and residency visas if the employee hasn’t got the right documentation,” Apps says, adding that Abu Dhabi is particularly tough.
“Insurers must provide full medical underwriting, plus chronic illness and congenital illness cover,” he says. “Insurance policies don’t normally cover this. We’re waiting to see if it will be just as strict in Dubai.”
Registration is not easy either, Apps says: “Effectively, they have to set up a whole new insurance company, which is tortuous and expensive. The alternative is to partner with a local carrier, and that is what most insurers will do. Our partner in the Middle East is Royal & SunAlliance. It carries the risk, but we do the marketing, sales, admin, claims handling, dealing with hospitals, and collecting premiums. Most insurers will also work with a two-tier service, although they will differ in how they divide the workload.”
Apps predicts that some of the large international PMI insurers will eventually set up their own companies, but given all the hurdles, that is some years away. Insurers are not the only ones which have to be approved to sell insurance in Abu Dhabi – brokers do too.
“We can only pay commission to approved brokers,” Apps says. “That isn’t so different to the UK, where insurers can only deal with FSA-regulated brokers. But it does mean UK brokers with clients in the UAE face losing a lot of commission. Fortunately, there is a way around it, by setting up an agreement with a local broker.”
Apps says moves in the Gulf are part of a wider global trend: “The world is changing. In the US, you have to go through a local broker. Eastern Europe, China and India are all likely to strengthen their legislation. These countries don’t want a load of money going out of the country, without taxing it. The days when anybody could sell insurance anywhere are gone.”
What sets the Gulf states apart is that they are strict: “If the insurer or broker is found to be breaking the rules, the authorities will close them down immediately, and it could take months or years to get your licence back.”
This makes it increasingly difficult for smaller players, Apps says: “You need the resources and expertise of a larger company. The demands aren’t impossible. Insurers can beat them – we have done. But you have to play by their rules.”
You also have to be patient, Apps continues: “Abu Dhabi approved its new laws in May 2005. Our licence wasn’t granted until 2007. You are dealing with emerging markets, where things don’t necessarily happen overnight. You have to have the contacts, speak the language, and brace yourself for high costs.”
But brokers should not give up, Apps says: “The international PMI market is growing by 25% to 30% a year. UK-based brokers are always complaining that the domestic market is standing still, but the international market is a fantastic opportunity.”
David Axtell, regional manager for the Middle East at InterGlobal, an insurer, says insurance companies can help UK-based brokers build local contacts in the region.
“The Middle East is shifting so quickly it is almost impossible to keep up with the speed of the changes and their implications,” Axtell says. “Abu Dhabi, for example, is a grey area. Does a UK-based broker really have to be licensed to sell policies here? Local legislators would prefer they are licensed, but can they touch a UK broker? Probably not. But brokers are on extremely sticky ground if they give unqualified advice or sell unlicensed products to people living in the Middle East.”
Axtell says brokers should contact local insurers to keep up to speed with legislative requirements and the implications of non-compliance, and to find partners to set up reciprocal broker agreements.
“This will mean sharing your commission with the local broker, but it also means you don’t have to worry about compliance, plus you are still securing the business,” he says.
David Pryor, senior executive director at MediCare International, adds: “Initially, I don’t think this regulation will have any effect, because the level of work involved in policing the changes will create a steep learning curve for the countries. But in time, the market will have to move towards licensed products.”
“As in the past, it will probably fall to brokers, the specialist press and responsible healthcare providers both here and in the region to get the message across,” Pryor warns.
In any case, reports suggest the number of insured residents in Abu Dhabi has increased tenfold since it began tightening legislation – and that looks like a very big market opportunity indeed.