This year 2014 ends recording big losses for cooperative insurance companies in Saudi Arabia, some companies reached to about 75% of its capital and almost these losses to be a disaster for some of the insurance companies which may lead to loss of their shareholders. Without the intervention of Saudi Arabian Monetary Agency to approve the capital increase for the loss-making companies these companies would certainly stop its activity.
According to statistics issued by the Monetary Authority that there is a remarkable increase in the number and value of claims resolved by the insurance companies, which reached at the end of 2013 nearly 5 billion despite the intervention of Saudi Arabian Monetary Agency with approval for a capital increase as an urgent solution in order to save some insurance companies from bankruptcy, and that was thankful intervention by the institution, but it is a temporary solution, but in my point of view the problem is persistent unless we solved the underlying causes, including -in my point and analytical view- that; the cooperative health insurance is the main cause of the loss; because the health insurance bill provided by the health service providers are exaggerated and very large, and the reason for this is the lack of a formal specialist medical supervision to monitor the providers of bills of health services, and the rates of insurance companies loss show that; the health insurance loss reaches up to 94% of the total losses in the year 2013, any simple calculation show that every billion riyals of health insurance premiums, insurance companies pay 940 million for health service providers, and I mean special hospitals and some health centers and clinics, and only sixty million may not cover the value of the operating expenses of the company remains for companies.
According to the opinion of some specialists in the health insurance that the reason of this loss, in addition to the high bills for health care providers, is the (pricing) policy error in the health insurance companies. In fact it is a difficult equation between the three parties insured and insured service provider and satisfaction of one of them means the second lose, when prices of policies raise, it will affect the companies and institutions which insure their employees, where they will raise the cost.
And reduce health service providers' prices sometimes mean the loss of the hospitals and health centers, which is keen to attract the best doctors and techniques for health services support.
And if insurance companies reduce its policies' rates, this would lead to its loss, and this is what we see today in the loss of some insurance companies even the loss reached down to 75% of the capital of some of them, prompting the central bank to agree to increase their capital by issuing new shares, so the cover of the loss will be on buyers of the new shares and the holders of the old stock account.
Here raises the important question, which is: Who will pay the expense of saving cooperative insurance companies ?, note that the value of insurance premiums in general in the Kingdom rose to $ 25 billion, 51% of them are private health insurance premiums. Based on Article 46 of the Implementing Regulations of the Cooperative Insurance Companies Control, the basis for pricing is to ensure the fairness of prices, which do not cause harm to the interests of the insurer and the insured, so that the product pricing based on actuarial studies and technical grounds.
Although Article 46 regularized the rights of insurers and insured, but the important party (a health service provider) not included in terms of monitoring & surveillance services, pricing and reviewing bills. Despite all the previous reasons, but I assure you that the health insurance companies in the kingdom are working according to competitive pricing policies led to its loss, in addition to the economic structure of these companies is weak and do not bear the loss, without increase of capital, although many international insurance companies depends on its other investments, both real estate or industrial in the development of their annual income, and that the size of the cooperative insurance companies and multiplicity in the Saudi market, which is growing rapidly leads me to claim them to merge to form a large and powerful entities bear the storms and crises for long. This may be the perfect solution.
According to statistics issued by the Monetary Authority that there is a remarkable increase in the number and value of claims resolved by the insurance companies, which reached at the end of 2013 nearly 5 billion despite the intervention of Saudi Arabian Monetary Agency with approval for a capital increase as an urgent solution in order to save some insurance companies from bankruptcy, and that was thankful intervention by the institution, but it is a temporary solution, but in my point of view the problem is persistent unless we solved the underlying causes, including -in my point and analytical view- that; the cooperative health insurance is the main cause of the loss; because the health insurance bill provided by the health service providers are exaggerated and very large, and the reason for this is the lack of a formal specialist medical supervision to monitor the providers of bills of health services, and the rates of insurance companies loss show that; the health insurance loss reaches up to 94% of the total losses in the year 2013, any simple calculation show that every billion riyals of health insurance premiums, insurance companies pay 940 million for health service providers, and I mean special hospitals and some health centers and clinics, and only sixty million may not cover the value of the operating expenses of the company remains for companies.
According to the opinion of some specialists in the health insurance that the reason of this loss, in addition to the high bills for health care providers, is the (pricing) policy error in the health insurance companies. In fact it is a difficult equation between the three parties insured and insured service provider and satisfaction of one of them means the second lose, when prices of policies raise, it will affect the companies and institutions which insure their employees, where they will raise the cost.
And reduce health service providers' prices sometimes mean the loss of the hospitals and health centers, which is keen to attract the best doctors and techniques for health services support.
And if insurance companies reduce its policies' rates, this would lead to its loss, and this is what we see today in the loss of some insurance companies even the loss reached down to 75% of the capital of some of them, prompting the central bank to agree to increase their capital by issuing new shares, so the cover of the loss will be on buyers of the new shares and the holders of the old stock account.
Here raises the important question, which is: Who will pay the expense of saving cooperative insurance companies ?, note that the value of insurance premiums in general in the Kingdom rose to $ 25 billion, 51% of them are private health insurance premiums. Based on Article 46 of the Implementing Regulations of the Cooperative Insurance Companies Control, the basis for pricing is to ensure the fairness of prices, which do not cause harm to the interests of the insurer and the insured, so that the product pricing based on actuarial studies and technical grounds.
Although Article 46 regularized the rights of insurers and insured, but the important party (a health service provider) not included in terms of monitoring & surveillance services, pricing and reviewing bills. Despite all the previous reasons, but I assure you that the health insurance companies in the kingdom are working according to competitive pricing policies led to its loss, in addition to the economic structure of these companies is weak and do not bear the loss, without increase of capital, although many international insurance companies depends on its other investments, both real estate or industrial in the development of their annual income, and that the size of the cooperative insurance companies and multiplicity in the Saudi market, which is growing rapidly leads me to claim them to merge to form a large and powerful entities bear the storms and crises for long. This may be the perfect solution.