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Mushrooming of an idea

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Radical new requirements for comprehensive medical coverage are set to shake up the health insurance industry in the Emirate of Abu Dhabi, but can international providers rise to the challenge? Stephanie Denton reports

On 1 January the government in the Emirate of Abu Dhabi introduced the second phrase of its legislation on health provisions for expatriates working in the country and visitors staying for more then two months.

According to its General Authority for Health Services, the new health insurance law states that: "All employees and sponsors are responsible for the procurement of health insurance coverage and possession of valid health insurance at all times for their employees and their families."

The first phase of the law was effective from 1 July 2006 and applied to all local, federate and quasi-government organisations and all private companies with more than 100 expatriate employees. The second phase now applies to all remaining expatriates.

Paula Covey, head of marketing at Bupa, says: "The responsibility has been put on the employer to provide health care cover. At one point people would have had access to healthcare free of charge, then they were charged for it and now they are expected to have insurance to cover them. The government has also set the type of benefits covered in policies."

And the legislation does not end there, according to Jonathan Earnshaw, sales director for JLT subsidiary Expacare: "It is compulsory to have health insurance either through a registered and approved company in the country or through Daman, the government's joint venture with Munich Re."

So, why has the Abu Dhabi government decided to do this? Ms Covey explains: "We have found that governments are starting to look at the burden that expatriates are putting on their healthcare systems. As pressure on these systems increases, governments are looking to make sure this doesn't increase social security payments for the population. This system has already been implemented in Saudi Arabia in 2005, with the licensing process introduced in 2006."

The fact the government has stipulated certain conditions must be covered by health insurance policies, indicates its drive is to save money, comments Paul Andrews, business development manager for William Russell: "Maternity and chronic conditions are very expensive claims, so Abu Dhabi may be looking to reduce the most expensive claims on their healthcare system."

On the bright side

David Pryor, senior executive director of Medicare International, adds, on a more positive note, that Abu Dhabi also has the customers' best interests at heart: "It is part of a drive to raise the standard of the general offering for those who need healthcare cover."

Although the legislation has been under discussion since 2002, some commentators believe its implementation has come around rapidly. So, have insurers had the time to adjust and how will it impact on the market?

"The actual impact will depend on the implementation of the policy and how punishment is handed out to those who don't comply," says Andrew Wilson, sales and business development director at Medibroker.

And Dubai-based Malcolm Wright, director of international sales in the Middle East for Cigna, points out: "If companies don't have a certificate then they can't sell policies. They must have the government's seal of approval." And this applies to brokers selling in the country too.

However, there are routes available for those companies that are not already registered in the country themselves, according to Mr Andrews: "The most popular route is to form a joint venture with an operation out there. This is extra work for everyone but it may sort out the cowboys."

This could be key for some in the market because, as Andrew Apps, director of global sales and business development at Good Health Worldwide explains, getting registered could be a costly experience. "For most large companies this is not a problem but smaller providers could be forced to leave the market. Providers have to be able to set up an office in the country and employ people there. Margins are tight anyway and providers are likely to need a lot of business to be able to make it worthwhile."

Stephen Ryan, international marketing manager at Axa PPP Healthcare, says: "There are currently 18 local companies with products registered (see box), some of which are 'fronting' for international insurers. It is doubtful whether the regulator will accept such arrangements in the long-term. There is little to recommend policies that do not benefit from local, professional, service operations or insurers that are not 'on the ground' to manage such low margin risk."

"In some areas this legislation could almost force smaller companies out of the market - for example, Abu Dhabi is pushing people towards its joint-funded venture with Munich Re," states Mr Earnshaw. "Whether insurers start dropping out of the region or not will depend on how difficult the government makes it to get regulated. This will squeeze and restrict the market."

He believes, however, that local providers have also been hit quite hard by the changes as the government has set a high standard of policy cover as compulsory: "Local providers will be forced to increase the level of cover provided. It will, therefore, raise standards across the board."

And these policy requirements may affect international providers too. Mr Earnshaw explains: "There is a minimum set of requirements both for benefits and underwriting. For example, all plans must have maternity cover and exclusions on pre-existing conditions are not allowed, chronic conditions are also included. Some existing insurance companies and policies may not meet these criteria. For example, all our plans with moratoriums are not valid.

"Insurers may have to waive exclusions on pre-existing conditions. Or people may buy the minimum cover from Daman and then get any extras from insurers, if they are allowed to do this."

So, will underwriters waive exclusions or pre-existing conditions? Mr Andrews says not everyone can do that: "We all have our own terms and conditions and there are limits to what can be covered. This could mean people dropping out of the market because including some things can have a huge impact on the risk assessment of a book. Some providers may also step away from the market, as they may not be set up to deal with these types of claims." He adds that Daman is a "government organ", which is offering policies for around £83 a year, "and international companies may not be able to match that".

Impact on the industry

Although these legislative changes are impacting on insurers, the policyholder is likely to be the most affected. Mr Earnshaw explains: "If people need to get or renew work visas they will be unable to do so without meeting these requirements for a licensed insurance scheme."

However, he offers a note of assurance: "This won't affect claims as the hospitals won't refuse people with insurance cover. It will only impact new or renewal visas."

Mr Apps adds his own customer warning: "People who hold policies need to check them as the law actually states that from the 1 July 2006 any policy must comply with the new law. If, in six months time, people find they do not have the proper policy then they will have to quickly get one - even if they have paid out already - or their residency will run out."

However, the new legislation could be good news for some expatriates, especially those who might not have had cover before. Mr Earnshaw explains: "This change will now mean that companies have to cover their whole workforce, whereas in the past it was often only middle or upper management. Manual workers will now be covered too."

Previous lack of cover

Mr Pryor adds: "There is plenty of research, which states that up to 50% of expatriates do not have appropriate healthcare cover, which in the event of a claim can be a problem for them and the domestic healthcare system of the country where they live. This is both a potential problem and market opportunity."

However, it could also have its drawbacks. "This new legislation will make it a less attractive market and insurance players are likely to become more targeted about who they sell to," says Mr Apps. "This will mean there is a lack of competition for the end customer."

Mr Wright adds that this is already happening in some cases: "Companies have been forced to get government polices. For example, a government organisation must buy its policy through Deman and cannot go to an international provider."

And Mr Andrews explains that the registration process itself is creating some difficulties for providers and their customers. "We are working on being an authorised provider and we don't want to scupper those plans by upsetting the government there. Therefore, it may be hard for people to get a policy for a while. Any British citizen going to the Middle East at the moment does not have a clear path to what the situation is."

"The reality is that the authorities are still not ready for this," adds Mr Apps. "Many organisations have applied for approval and most have premises in the country and are just waiting for the seal of approval."

There are other issues that concern the market too. Mr Wilson believes there is confusion over enforcement of the legislation: "There is a big question mark over enforcement and how this will work. People could either be fined or they could be removed from the country. However, it is unlikely that the government will want to upset the big contractors there and they will need to make sure punishment is not too stringent." There is a common belief that insurers will also be fined for issuing non-compliant policies.

Furthermore, Mr Wilson questions the long-term future of the legislation: "There is a five-year agreement with Daman but in five years we may see problems. For example, if the agreement ends, will we see large claims just before this as people lose their maternity cover. Also, what happens if the provider changes at that stage and Munich Re steps out of the market?"

The big attraction

So, in the long term, is this market attractive enough for international providers to stay, or is being authorised likely to prove too cumbersome to pursue? Mr Wilson is confident that there is still a place for international providers: "If there is a choice between Daman and an international PMI brand with a long history, then the PMI providers may look more attractive to the customer.

"The local cover is for local hospitals, however, and the average expatriate worker would prefer to go home for treatment and so they will still also want global international cover.

"The Daman system is also cumbersome, as you have to fill in (hard copy) paperwork, which can be very unattractive for larger firms with a lot of staff. There are definitely holes in the system."

Mr Ryan also believes that committed insurers will stay: "Such barriers will not deter those genuinely committed to the sector and will give customers increasing confidence that medical insurers are serious, professional entities. Greater trade weight in fewer hands will put pressure on providers to maintain high standards of care at realistic cost and stabilise risk prices at viable levels."

The general consensus in the market place is that other countries are set to follow Abu Dhabi's example in expat PMI. Mr Andrews confirms this: "Bahrain is looking to make PMI a visa requirement in 2008 and Oman is currently revising its policy. Qatar is also doing something in this area this year."

Mr Apps, therefore, concludes by urging international providers to get organised: "This is spreading and providers need to get themselves sorted out. Standards are being raised so that policyholders don't have worthless policies but it also puts pressure on insurance companies to be local and to provide a high standard of cover." Only time will tell, however, if international providers will be able to rise to this challenge.

AUTHORISED COMPANIES

INSURANCE COMPANIES

- Abu Dhabi National Insurance

- Abu Dhabi National Takaful Company-Takaful

- Al Ain Ahlia Insurance Company

- Al-Buhaira National Insurance

- Al Dhafra Insurance Company

- Al Khazna Insurance

- Al Wathba National Insurance

- Al Sagr National Insurance

- Alliance Insurance (Public share holding company)

- American Life Insurance Company

- Arab Orient Insurance Company

- Arabian Scandinavian Insurance

- Daman

- Emirates Insurance Company

- Oman Insurance

- Qatar Insurance Company

- Ras Al Khaimah National Insurance

- Saudi Arabian Insurance Company

BROKERS

- Apex International Insurance Mediations

- Continental Insurance Brokers

- Fenchurch Faris

- Future Insurance Brokers

- General International insurance Broker

- Guardian Insurance Brokers

- Marina Insurance Brokers

- Marsh Insco

- Masters Insurance Brokers

- Mepa Gulf

- Nas Administration Services

- National Resources Insurance Services Establishment

- Prime Insurance Brokers

Source: General Authority for Health Services Abu Dhabi (correct at time of going to press).

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