In July 1997, after extensive research into the needs of the Saudi market, BUPA Middle East, a joint...
In July 1997, after extensive research into the needs of the Saudi market, BUPA Middle East, a joint venture between BUPA International and the Nazer Group, was established. Its aim was to continue expanding the vision of both companies to provide high quality healthcare solutions.
To design an international insurance scheme specific to one country, while allowing for extensive travel around the world, capturing high quality and comprehensive data is essential.
Some of the issues that need to be considered include the different healthcare needs of different nationalities and the high variation in treatment costs across markets. This is further complicated by the variations in medical practices and the health status of different nationalities, for example, the higher incidence of diabetes in the Middle East.
Usually the international medical insurance 'product' is based on the healthcare market of the country the insurer wants to enter. However, the benefits of the policy will need to be structured in a manner that enables the member to receive high quality treatment across a range of different markets. This also has to be combined with a degree of flexibility to take into account customers' different needs. The benefit levels will also need to be positioned in such a way as to ensure appropriate treatment costs will be met.
International insurers will be affected by the economic cycles of overseas markets. The economic collapse in Asia, which was followed by Russia and the hiccups in Latin America, all have has an impact on business. As part of the annual planning process, insurers need to take such cycles in account. The correlation between international trade growth and demand for this product is high.
Saudi Arabia is politically secure, with a sound economy and a stable exchange rate. The population is around 20 million. There are around six million non-Saudi residents, of whom around 8.5% work for the government. The cost of healthcare to the government is Riyals12bn per year. The country has one of the youngest populations in the world, with 64% under the age of 24. In addition, it has one of the highest population growth rates in the world (3.5% per annum).
In 1995, BUPA International estimated the number of people with private medical insurance (PMI) cover at 330,000, around 1.7% of the population. Between 90% and 95% of the market consisted of corporate business, driven by the need for employers to provide adequate healthcare cover to their expatriate staff. Therefore, establishing a new health insurance company that provides quality products and customer service would be attractive to any international insurer with the local knowledge and experience to succeed.
BUPA International drew upon extensive international PMI experience in UK, Spain, Ireland, Hong Kong and Thailand to understand the detailed PMI operational issues in Saudi Arabia. All countries have different healthcare networks and the requirements of the local and expatriate population differs in every country.
Detailed research within the PMI market in Saudi Arabia showed:
l Few experienced companies, with the notable exception of the government-owned NCCI.
l Extremely poor customer services skills within the sector.
l Rapid changes in market share as companies came and went.
l Providers - hospitals and polyclinics - are unsupportive of PMI as insurers were very late payers.
l A substantial level of self-insurance by companies as the PMI industry is poor.
l Rapid growth a strong possibility as government policy was towards company insurance of all expatriates, which would increase the PMI market significantly.
Compliance with both legal and commercial issues led to the recruitment of a local partner. The search was rigorous and comprehensive. The final choice was the Nazer Group, which was already involved in healthcare. It had a modern, high standard of professional management and was considering entering the PMI market before BUPA International approached it.
A review of the general history of joint ventures in Saudi was encouraging as there had been few failures. BUPA International created BUPA Middle East by setting up a multi-discipline team from three different operating units and staff were selected from 13 nationalities and Peter Garrad-Cole, a highly experienced managing director, was seconded from the UK.
David Boyle is director, new businesses, at BUPA International
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