Rising claim costs continue to outpace premium growth, presenting a difficult challenge for Saudi insurers trying to protect their bottom lines. While the Kingdom’s health insurance market expands steadily, payers are earning far less than the healthcare providers they contract with. This widening disparity has sparked a debate over whether controlling more of the care pathway is becoming essential for maintaining profitability.
A Structural Divide in Margins
The profitability gap between providers and payers is structural, according to L.E.K. Consulting. The consulting firm noted in an April report that repricing alone would not close the existing divide. Between 2016 and 2024, the country’s five biggest private healthcare providers generated operating margins of 16% to 22%. This performance sat above the 16% global average. By comparison, the five largest health insurers posted margins ranging from a 4% loss to a 6% profit, ending at about 5% in 2024. This result landed below the 7% global benchmark for the sector.
Group policies sold mainly to employers account for more than 70% of premiums, yet this dominant revenue source is not enough to support the financial health of the insurers. The market continues to expand despite these profitability challenges. Mordor Intelligence projects the Saudi health and medical insurance market will grow 6% annually to $16.12 billion by 2031 from $11.41 billion in 2026. However, insurers face mounting cost pressures that complicate this growth. Mordor Intelligence identified GLP-1 obesity drugs as an emerging claim driver, adding an estimated $800 million (SAR 3 billion) in annual costs. Regulatory limits on premium increases also restrict insurers’ ability to keep pace with medical inflation. L.E.K. estimated that fraud, waste, and abuse account for 10% to 12% of total claims, further weighing on financial results.
Related: Saudi Insurers Face Profit Challenge
Historically, markets facing this specific disconnect between high-margin providers and low-margin payers have often shifted toward managed care models where ownership bridges the gap. The move by Saudi insurers to acquire assets is a logical play to align financial incentives, yet it introduces new complexities regarding operational efficiency that differ significantly from the passive nature of traditional insurance underwriting.
Moving Into Healthcare Delivery
Rather than relying solely on pricing adjustments, insurers are increasingly looking at owning healthcare assets. A 2019 amendment to Saudi Arabia’s Private Health Institutions law allows insurers to own clinics, diagnostic centres, and hospitals. The country’s two biggest insurers have already moved into healthcare delivery. L.E.K. Consulting advised insurers to begin with consultation and diagnostic services rather than hospitals. These facilities require less capital while still allowing payers to influence referrals and treatment decisions. Mordor Intelligence stated that insurers are increasingly combining insurance with telehealth services as they search for new ways to manage costs and compete.