The implementation of a compulsory healthcare insurance scheme in Oman will boost growth in the country's under-penetrated insurance market, S&P Global Ratings says in a new report. But the market will need to address technical and operational weaknesses in order to bolster incomes and make the most of the growth opportunities, says the international rating agency. In September 2017, the Sultanate’s Ministry of Health gave its approval to implement a compulsory healthcare insurance, with effect from January 2018. The plan will be rolled out in phases, starting with expatriates working in large companies. S&P, in its report titled “Compulsory health insurance in Oman will boost the sector but could exacerbate declining profits”, notes that health insurance currently contributes approximately 26% of total premiums in the Omani market. “Once it becomes compulsory, we believe health premium alone could see a growth rate in excess of 25%, similar to what we have seen in neighbouring states that introduced compulsory health insurance, especially Dubai over 2014-2017”. S&P said this surge in health premium would also support the overall Omani insurance market and expects total premiums to grow by around 10% over the next two years. Profitability In terms of technical results, pricing is the major challenge the market will face when compulsory health insurance is implemented in 2018, says S&P. Whether the health policies would be actuarially priced or remain open to market competition is currently uncertain. It is worth noting that around 58% of health premiums are retained by insurers. If health loss ratios are not controlled, insurers' profitability and capital adequacy could deteriorate. Insurers could control loss ratios by selling policies at minimum technical pricing at least, while also trying to control medical fraud and misuse of medical benefits, says the rating agency. Challenges Operational challenges include whether insurers have sufficient claims management infrastructure to manage the increased volume of claims and whether they have enough resources to manage the large number of policies to be issued.
Oman's insurance industry will need to overcome operational deficiencies, including underdeveloped claims management infrastructure, in order to respond to incoming rules requiring mandatory health insurance for the country's population. If this can be achieved, however, gross written premiums in the country are forecast to increase by roughly 10% in the next two years, according to S&P Global Ratings. The health insurance rules will begin to be implemented in January and will be rolled out in phases, with expatriates the first to be enrolled.