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Daman National Health Insurance Company was established by the Abu Dhabi Government in 2005 and is now the UAE’s leading health insurance firm with a claimed 50 per cent market share in terms of membership.
It currently has 950,000 members – the majority in Abu Dhabi, though there are around 7,500 in Dubai.
The Abu Dhabi Government has proposed Daman should manage the insurance of 350,000 UAE nationals, which would increase its membership to 1.3 million. The company plans to recruit a further 150,000 members by the year-end, taking the total membership up to 1.45 million.
CEO Dr Michael Bitzer talks about the company’s performance in 2007 and the outlook for this year and beyond.
How was 2007 for Daman in terms of the growth in numbers of customers, premiums and revenues?
We grew from around 250,000 insured members at the start of the year to 950,000 at the end, out of which 700,000 were basic card holders and 250,000 held other products. We have 7,500 members in Dubai. We have experienced tremendous growth and are also expanding in terms of staff numbers – up from roughly 500 to 900. The year was very successful but we are not yet releasing financial results for a number of reasons. The figures are not yet audited – we have the preliminary results but they are unaudited. Therefore, I cannot give you figures, but I would say we are a profitable company.
What challenges did you face in 2007 and how did you overcome them?
The biggest challenge was the enrollment of individuals in our branches, especially in January and February. The number of members enrolling in branches – not as a group but as individuals – was much higher than expected so we had some bottlenecks initially. There were holdups in card production and the issue of policies. We managed this by changing our procedures, hiring extra staff and opening other facilities.
The other challenge last year, which we continue to face, was how to educate members about what is and what is not covered by their policies. This is achieved mainly through company presentations and booklets. It is a continuous process.
Another important challenge was adding network providers. We managed this through direct contacts with hospitals, clinics and pharmacies. And we added several providers in Dubai and signed contracts with international providers in 30 countries.
Can you provide details about the claims the company settled in 2007? What increase do you expect in claims this year?
I cannot give you all the figures because if I do, you would learn indirectly our level of profitability. But the amount we currently settle per month is in the range of Dh60 million and, of course, the total is increasing in line with membership growth. The amount will also increase a little in line with medical inflation. We currently receive slightly more than 600,000 invoices per month – there are more than 200,000 claims and each one involves on average three invoices.
What is the outlook for Daman this year?
We plan to have around 1.1 million insured members by the end of 2008. But this growth may not come so much from Abu Dhabi, because the capital is more or less covered. There is natural growth, because the population is increasing, but we also intend to have a bigger market presence in Dubai. We aim to have about 50,000 members in Dubai by the year-end. That’s our target, but this will depend on future legislation in there.
How do you manage inflationary pressure?
We have pressure from two sides. One is inflationary pressure on our operating costs such as salaries and rents for buildings. These hit us as they do to any other company. Of course, we have to pay our employees higher salaries because they are also suffering from inflation. This has to be covered with more business or higher productivity. That’s what I think every company does. We can only pay better salaries if productivity goes up, otherwise we have to increase premiums, which is difficult.
The other inflationary pressure comes from the prices in hospitals, physician consultation fees, pharmacy costs, etc. We are in discussions with our providers, because they also try to raise rates. This is a normal negotiation and the result is usually a compromise. We try to convince hospitals and other providers to keep their increases below the overall inflation rate, so we can avoid having to increase premiums.
Since we carry risks we have to monitor what’s going on. If provider prices go up substantially, then we have to adjust premiums. The basic premium will be the same this year but there might be a seven to eight per cent average increase in enhanced premiums, which is acceptable if compared to overall inflation.
Any plans for increasing capital?
No. Currently we have no plan to increase capital because our reserves are sufficient to cover any risk. We have Dh250 million that was our founding capital. We also have reinsurance protection for our enhanced products, so there is no need for more capital.
How should brokers and briefcase brokers from abroad be regulated?
Brokers in general fall under the supervision of the insurance regulators who should ensure there is a certain level of professionalism. We have excellent brokers. Overall I’m satisfied with the brokers we deal with.
All brokers, including those from abroad, must be regulated in the interests of consumer protection. If a broker from abroad is not regulated, then the authorities can’t do much to help the consumer.
The UAE plans to establish a new regulatory body, the Federal Health Insurance Authority. What is this organisation expected to do?
That is a very difficult question because we have a regulator in Abu Dhabi, there will be a federal regulator and there is a regulator in Dubai. The most important task for the federal regulator is to make sure the systems in Dubai and Abu Dhabi do not conflict.
How does the ratio of per capita spending on health here compare with, say that in the US and India?
This is a measure used by the World Health Organisation and others – to say in country A we spend 10,000 and in country B we spend 5,000. You have different costs of living and different structures in different countries. The amount you spend does not say anything about the quality of service. For me it is not very useful information.
What is the level of health spending in the UAE?
Statistics regarding health spending are not available. I think the service is good but it is not as it should be. If you compare the amount spent here on healthcare and compare it with the quality, then there is a need for improvement.
Do you expect to see more investment in the industry this year?
New companies are in the process of being set up. We invest heavily in IT, especially to get rid of paper-based processes. And we invest in training and skill development. Others probably have similar initiatives.
What was the value of Daman’s premiums in 2007 and what is the forecast for this year?
The figures are not yet closed but premiums were in the range of Dh1bn. We hope to raise this figure by about 25 per cent this year.
How big is the health insurance market in Abu Dhabi and how many players are there?
There are 27 licensed health insurance companies in the emirate and in the UAE there are many more, I estimate there are around 40 in Dubai. But not all of them have significant market share. You are talking about five to 10 really active players.
And where does Daman stand in terms of market share?
You can calculate market share according to premiums and the number of members. If you talk about members, then I would say we have in the range of 50 per cent of the UAE market. There are 1.8 million to 2 million insured members in the UAE right now.
Do you support mergers to create bigger insurance companies?
Sometimes mergers make sense, sometimes not. Here there are many small players, so I would say mergers would make sense to create stronger companies.
Dr Michael Bitzer
CEO, Daman National Health Insurance Co
Dr Michael Bitzer was appointed CEO of the Daman National Health Insurance Company when it was established in 2005. He was previously MedNet’s Regional Managing Director for the GCC and held similar positions in the health insurance industry in Germany, before moving to the Middle East. Dr Bitzer holds an MBA from the University of Applied Sciences in Lahr, Germany, and a PhD in medicine from the University of Freiburg. He served with the German army, reaching the rank of major.
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