Oman’s mandatory health cover plan to spur premium growth
With the sultanate’s plans to introduce mandatory basic health insurance cover for all nationals, expatriates and visitors, the measure will spur premium growth and generate additional cross-selling opportunities for insurers in Oman, according to Moody’s Investors Service.
The new health cover scheme will allow insurers to unlock extensive untapped potential in the Omani market, and is credit positive overall, the global ratings agency said in a report.
Premium growth will emerge over the short to medium-term, reflecting the phased introduction of the new cover. Larger insurers with better claims handling capacity and underwriting expertise will benefit most, Moody’s said.
Oman’s government first announced plans for compulsory health insurance in September 2017, and intends to roll out the new cover in stages before the end of 2019, starting with private sector employees.
Citing the Capital Market Authority’s (CMA) recent announcement, Moody’s said around 2mn private sector employees and their dependants will be eligible in the first stage of the roll out.
In 2017, even before the introduction of the mandatory cover, health premiums in Oman grew by 16 per cent, accounting for 30 per cent of total insurance premiums written in the country. ‘We believe premium growth will accelerate further once the plan is implemented’, Moody’s said.
It said the new policy is designed to be affordable, and is therefore likely to carry low margins for participating health insurers. ‘Smaller insurers could therefore find the product unattractive. Larger players, who benefit from scale advantages, better claims management, stronger provider networks and superior cross-selling capacity, will likely be more keen to participate’.
Moody’s said premium growth could accelerate further if the new scheme encourages more consumers to opt for an enhanced level of cover that offers greater protection.
As the new mandatory cover is designed to be affordable, Moody’s said premium rate regulation will likely suppress margins for participating health insurers. It added that some insurers may lose high-margin business after the implementation of the new scheme.
The ratings agency said the new cover will pay for three main services: Hospital admission, emergencies, and the treatment of common diseases. ‘The cost will be borne by employers, with the option (for both employer and employee) of topping up with additional layers of insurance. Employers that currently offer their staff more comprehensive and costly health insurance packages will have the option of trading down to the basic mandatory cover. This may result in the loss of high margin business and increased competition for some health insurers’, Moody’s said.
However, as participating insurers are permitted to cross-sell additional cover alongside the basic mandatory health insurance, they may be able to improve their pricing margins, Moody’s added.