The Middle East & Rest of the World

2014 International Private Medical Insurance Inflation Review 

This is the second in a series of articles from Pacific Prime on International Private Medical Insurance (IPMI) premium inflation from August 2013 through July 2014. The entire review will cover a number of different territories and insurers all over the world. A proper introduction to the series can be found on the Pacific Prime website here.

Part one of this series, which features the Southeast Asian region, can be found here.

In part two of the series we cover the Middle East, using Dubai as an example. Then, switching to the rest of the world, we examine IPMI premium inflation rates in the United Kingdom, Kenya and Brazil.

Premium Inflation in the Middle East

Dubai

IPMI medical inflation in Dubai has dropped slightly to 7.0% in 2014, marking its second consecutive year of decline. This is an encouraging sign from a country that has historically seen high medical cost increases. It is likely that relatively slow recovery from the Global Financial Crisis has had an impact on the rate of increases in health insurance costs in Dubai. While Asia saw a quick recovery, and Europe and the US began to see recovery in 2011, the UAE’s economic recovery has only caught up with other regions in the past couple of years.

While economic recovery has been an issue, competition in Dubai is also an important consideration in the IPMI market. In fact, competition in Dubai may be higher now than ever before. The effect of this competition combined with Dubai’s economic recovery has lead to the lowest IPMI inflation rate since 2010. It will be interesting to watch Middle Eastern IPMI, as local authorities impose new policies to further control the ever-growing market. In Dubai, for example, there is a new mandate that all companies provide health insurance to their employees by the end of June 2016.

Premium Inflation in the Rest of the World

The United Kingdom

As the world economy has rebounded from the Global Financial Crisis, the UK has been able to effectively control rises in healthcare costs, and insurers have been able to reign in premium inflation.

The United Kingdom over the past year has had a relatively low 7.3% IPMI premium inflation rate, which is the lowest such rate that the UK has seen in the past 5 years. While the country’s National Health Service has managed to address the medical needs of its people, it has also helped to control medical costs. Combine this with a stable population of high net worth individuals and expats in the UK, as well as a stronger economy, and we can see why IPMI inflation there has been manageable. Expect this trend to continue.

Kenya

Kenya’s IPMI inflation rate fared very well over the past year. With a rate of 6.3%, it tied with Indonesia for having the lowest rate of any country in our survey. Additionally, Kenya’s 5 year average inflation rate of 7.8% is 2^nd only to the Philippines.

To answer why the inflation rates in Kenya have been low compared to much of the rest of the world, we look to the laws of supply and demand. While the use of general health insurance and overall patient claims have risen dramatically in the country (over 45% in 2013), IPMI specifically has not seen the same trend. This is likely due to a decrease in the number of foreign nationals registered in Kenya from 2012 to 2013. The associated fall in demand has kept premiums in check as competition between insurers has increased.

Brazil

Brazil’s population of expats boomed in 2010; growing from 960,000 foreigners to 1.5 million by 2011. A parallel boom in the country’s IPMI inflation could be seen at the time as it soared from 6.9% in 2010 to 11.8% in 2011. Since then the number of expats in Brazil has remained relatively stable, and IPMI inflation has stabilized as well. We will be keeping an eye on Brazil’s expat population going forward, and monitoring if the correlation between population growth and IPMI inflation continues.

Regional Comparison

The tables above show that IPMI inflation rates were markedly higher in Asia than in other regions in 2013. This year, however, Asia has only slightly higher rates than other regions.

Dubai shows that the Middle Eastern market has the lowest inflation rate of the regions covered in our review over the past 5 years. However, we also know that other countries around the world have experienced lower IPMI inflation in any given year. Furthermore, it’s noteworthy that all regions have similar average IPMI inflation rates over the past year.

When taking IPMI inflation into account, it is important to note trends in medical costs, supply and demand, demographics, and a number of other factors. Even taking all of these into account in various regions around the world, results have been similar in all areas. This would point to one of two possible reasons for global IPMI inflation trends.

First, it is possible that the global insurers included in the survey are spreading capital throughout the world. When profit margins are larger in one region of the world, people in lower performing markets may be receiving the benefits of that, as insurance companies can then keep premiums lower worldwide to remain competitive.

Another possibility is that global trends in the proliferation of medical technology and procedures, as well as prescription medication, is occurring more rapidly than ever before, and this is normalizing both medical costs and IPMI premiums worldwide. Increased mobility of patients and the rise of medical tourism would lend credence to this idea, since IPMI insurers could be realizing that national borders are becoming even less relevant to their clients.

Part One - Southeast Asia

Part Three - Insurance Providers