Do You Need More Insurance When Expanding Your Business??
Typically as your company grows, so does your liability and therefore your overall insurance spends. It is all relative, but how can you keep your costs under control?
For Group Medical Insurance – when you opened the Dubai office there were less than 25 staff plus a few dependents (spouse and children) needing to be insured. With such a size, insurers will typically label you an “SME” and your scheme would be what is called “Pool Rated”. By pooling risks, it enables insurers to offset the higher costs of the less healthy members, with the lower cost of the healthy ones. In theory, this works great, companies are protected and renewal premium increases are reasonable. However in practice, this usually only works well with the higher-end International insurers such as Bupa, Allianz, Cigna & Aetna.
Lesser quality/lower tier insurers can sometimes overreact and get very defensive when they see poor performance and claims are high, often slapping clients with a huge increase at the time of renewal.
As your population grows, now with more staff and dependents the total number of lives you need to insure approaches and surpasses one hundred lives. The higher quality insurers now consider you to be a “Large Corporate” scheme and the risk is insulated to just your group. This means if everyone remains healthy, has no serious health conditions and claims performance is on the whole, good, your increase at renewal should be much lower. The target is often to beat medical inflation (running at around 11-12% in the UAE) but if claims performance is really good then in some cases renewal increases will be low single digits and for a lucky few perhaps no increase at all.
Our clients tend to trend well because we implement meaningful, relevant, and tangible wellness initiatives. We also help clients educate their employees to correctly utilise their health insurance benefits and not fall victim to poor choices such as unnecessary trips to the hospital or getting poor advice from healthcare professionals who are incentivised to overprescribe.
So actually, if everyone is relatively healthy and the policy is used in a responsible way, whilst the overall cost of the scheme has increased due to the growth in numbers of the business, the average cost per person may have decreased as you benefit from economies of scale.
Another way to control costs is to look at categorisation. It is commendable when companies wish to give everyone the same level of cover. However, as the company grows it is commonplace to then have different categories. An example would be a category for higher management and another for all other employees. Very large groups may have multiple categories, the most I have personally seen is sixteen! (35,000 employees though!).
You could also consider tweaking some of the benefits. This is known as “cost containment”, but we would only suggest this in situations where claims performance is poor, utilisation is high (too many trips to the hospital, some of which were totally unnecessary) and we need to reduce the overall cost.
General Insurance Policies are far simpler to manage premium costs. General policies might include Property All Risk, Public Liability, Workmen’s Compensation, Professional Indemnity, Directors & Officers and many others – it stands to reason that as the business grows so do the sums insured, therefore the premiums will also increase. Well, this is true, the risk has increased. However, a good broker will usually be able to negotiate the rates accordingly and lower again your average cost per employee or per million sum insured. There are some exceptions to this where a certain market (professional indemnity for example) has seen rates harden globally and this filters through to the UAE market and everyone’s premiums increase.
If you would like some guidance for your company, please contact email@example.com.