GAC says Saudi health insurance sector shows high concentration; top 3 firms hold 83% market share

The General Authority for Competition (GAC) said the competitive assessment of the Saudi health insurance market generally demonstrates a high level of competition among companies on the different links of the value chain.

The economic concentration in the health insurance market is high, as the combined market share of the top three players reached 83%, which poses competition risks, GAC added in a recent study.  

Medical insurance covers nearly 30% of the working population, as the system is mandatory for the private sector and some other industries.

The following table shows the market shares held by the top two and three companies in the health insurance market from 2013-2020:

GAC noted that the health insurance market witnessed an expansion in the recent years, after medical insurance became mandatory for the private sector employees and their families, coinciding with pent-up demand for medical services.

This was driven by several factors, such as the growing population and demographic changes.

A detailed study was conducted on the health insurance market to protect fair competition and curb monopolistic practices, GAC explained.

According to the study, GAC concluded that health insurance policies and product prices depend on many factors, including the maturity and features of the main insurance policy, as well as the strategies of insurance services providers and the internal cost structure. Therefore, the price range of the same product may significantly vary between insurers.

On the other hand, the private healthcare markets do not follow any global standards to ensure fair pricing of healthcare services. Private institutions negotiate for different discount levels compared to the prices previously approved by the Ministry of Health.

The actual prices of healthcare services vary significantly from the ministry’s prices due to the discounts obtained by some medical insurance services providers, which might range between 50% and 60% in specific cases.

GAC also explained that concentration in the health insurance market is on the rise, while no companies entered into the market despite industry growth. Accordingly, the current competition could be subject to market shocks as the limited number of market players poses risks.

The current competition could also be fragile, which may push market participants to replace the existing balance of competition by explicit or implicit collisions. This, in turn, might drive prices higher and reduce innovation.

GAC also underlined the necessity for modifying the regulatory obstacles to market entry by new companies, such as the restrictions imposed on foreign direct investment, which limit the ability of foreign firms to compete in the Saudi market.

The high capital requirements, which raise market entry costs, should be also changed.