Can Saudi insurers protect profits without owning healthcare providers?
Rising claim costs continue to outpace premium growth.
Saudi Arabia's health insurance market is expanding steadily, but insurers continue to earn far less than healthcare providers, raising questions about whether controlling more of the care pathway is becoming essential to improving profitability.
"The profitability gap between providers and payers is structural, not cyclical," L.E.K. Consulting said in an April report. It added that repricing alone would not close the gap.
From 2016 to 2024, the country's five biggest private healthcare providers generated operating margins of 16% to 22%, above the 16% global average, according to L.E.K. By comparison, the five largest health insurers posted margins of 4% loss to 6% profit, ending at about 5% in 2024, below the 7% global benchmark.
The market continues to grow despite the profitability challenge. Mordor Intelligence projects Saudi Arabia's health and medical insurance market will grow 6% annually to $16.12b by 2031 from $11.41b in 2026.
Group policies sold mainly to employers account for more than 70% of premiums.
However, insurers face mounting cost pressures.
Mordor Intelligence identified GLP-1 obesity drugs as an emerging claim driver, adding an estimated $800m (SAR3b) in annual costs. It also said regulatory limits on premium increases continue to 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 insurer profitability.
Rather than relying solely on pricing, insurers are increasingly looking at owning healthcare assets. A 2019 amendment to Saudi Arabia's Private Health Institutions law lets insurers own clinics, diagnostic centres, and hospitals, with the country's two biggest insurers already moving into healthcare delivery.
L.E.K. said insurers should begin with consultation and diagnostic services rather than hospitals because they require less capital whilst influencing referrals and treatment decisions.
Mordor Intelligence also said insurers are increasingly combining insurance with telehealth services as they look for new ways to manage costs and compete.
Questions to ponder
- Should Saudi insurers own healthcare providers to improve profitability?
- How can insurers protect margins if medical costs keep rising faster than premiums?
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EXPERT OPINION
The provider view explains where to enter. This is not about buying hospitals; it is about owning the front door of care. Consultation and diagnostics are low in capital intensity, light on licensing, and control the point where referrals and data originate. With the 2019 reform in place and Tawuniya and Bupa Arabia already building and buying clinics, the window is quarters, not years.
From the insurer's side of the ledger, the answer is no. The margin gap between Saudi providers and payers, roughly 16 to 22 percent against about 5 percent, is structural. It comes from value-chain position, not underwriting discipline, so no repricing cycle closes it. Owning the right profitable assets enables insurers to adjust their value chain position towards higher margin profit pools, turning claims pressure into economic value.
Globally, we are seeing increasing interest in greater integration between healthcare financing and healthcare delivery, driven by the need to improve outcomes, manage costs and create a more coordinated patient experience. However, ownership of healthcare assets is only one way to achieve this. The more important factor is the alignment of incentives across the healthcare ecosystem.
Organizations that are most successful tend to be those that can better connect financing, clinical decision-making, data and patient engagement to support preventive health, earlier intervention and more effective management of chronic disease. Ownership can provide one mechanism for achieving this alignment, but it also introduces additional operational complexity, capital requirements and execution risk.
From a global perspective, the key question is therefore not whether insurers need to own healthcare providers, but how they can create stronger alignment between funding, care delivery and health outcomes. Different markets will pursue this in different ways depending on their healthcare system, regulatory environment and stage of market development.