1. Claims Experience Requirements
1.1 Medical Underwriting
SAMA has developed claims experience forms and quotation instructions at the request of the industry.
These have been updated following feedback from the industry, and the 2016 version was issued on 9 June 2016.
1.2 Nature of the Claims Experience to be Required for Medical Insurance
At the request of the industry SAMA developed standard forms to be used by all insurers. These were issued in December 2014. and came into effect from 1 January 2015.
SAMA notes that sometimes the completion of these forms may not be as required, and would clarify that:
a) The company providing the claims experience must always provide data that is as up-to-date as possible. The claims experience provided should at a minimum include all claims processed more than 3 months before the claims experience reporting date. b) The monthly data provided for the most recent underwriting year is for claims paid in each month, and claims outstanding at the end of each month. All data must be shown. c) The Policy Year is the year from the last renewal data of the policy. If, for instance, a policy renews on 1 July, then the 2016 Policy Year is the period from 1 July 2016 to 30 June 2017. d) Full benefit information must be provided as staled in the experience form instructions.
1.3 Responsibility for Providing Claims Experience
The key relationship is between the policyholder and the insurance company. SAMA requires that the insurance company provides the policyholder, upon his written request or his representative's written request (i.e. broker), within 15 working days of making the request with sufficient and accurate information of his claims experience, including up-to-date incurred claims. It is the responsibility of the policyholder to provide the insurance company with sufficient and accurate information for it to price and underwrite the risk it is taking on.
Where the insurance company outsources its claims administration to a I PA, then the TPA is required to provide the data requested to the insurance company within 10 working days of its request.
The claims experience report issued by either the insurance company or its TPA must be stamped & signed by the authorised person and the report must be printed on the issuer heading letters (insurance company or its TPA).
After receiving the claims experience, the policyholder should review the report and confirm in writing that he reviewed it and that all information included within the report is accurate to the best of his knowledge.
If the insurance company fails to obtain the policyholder's confirmation that the claims experience is accurate then it should note that it may not be able to take any action if it subsequently discovers it has charged an inadequate premium rate based on the data provided.
With respect to personal lines business, the insurance company is not required to obtain the policyholder’s claims experience in a report format from the policyholder or the existing insurance company; instead the insurance company should ensure that its proposal form asks about all material facts including the policyholder's claims experience.
If it is found that inaccurate claims experience was provided then the insurance company shall have the right to review the premium rate charged, and take appropriate actions. These include adjusting the premium, or requiring that any commission paid to the broker be refunded if due to broker misrepresentation or non-disclosure.
In extreme circumstances where evidence has been obtained that claims data provided to the insurance company in order to quote was misstated with fraudulent intent, then the insurance company may cancel the policy and take the proper actions against the parties who are responsible.
1.4 Role of Brokers
A broker may collect the claims experience and provide it to the insurance company. It should be noted that brokers must act on behalf of the policyholder and conduct their business according to professional and ethical standards and as per the applicable laws and regulations, including the provisions of the Implementing Regulations of the Law on Supervision of Co-operative Insurance Companies, Insurance Intermediaries Regulation, Market Code of Conduct Regulation and Regulation of Reinsurance Activities Regulation.
Using a broker to collect this data docs not in any way reduce the responsibility of the policyholder to ensure that accurate information is provided to the insurance company.
1.5 Pricing of Group Medical Insurance
Insurance companies must comply with the following instructions when applying the claims experience:
1. Apply an experience rating approach for group risks, and they must also supply a fully justified credibility formula recommended, and signed off, by the Company’s Actuary. 2. A form or Excel spreadsheet shall be produced which ensures that the pricing mechanism adopted complies with the credibility formula that is recommended by the Company’s Actuary. A copy of the form or Excel spreadsheet must be provided to SAMA. 3. The Actuary shall determine the annual increase in the burning costs allowing for claims trends, inflation to be built in the credibility formula calculation mechanism. 4. The Actuary’s Pricing Report shall specify the size of schemes for which this blended pricing approach must be adopted. It must define the size of smaller schemes where book rates shall be used. 5. The Insurance Company may request that its Actuary assists with individual quotations for a particular scheme if it considers that there are reasons why the scheme falls outside the standard pricing process. All such individual quotations must be fully documented, auditable, and made available to SAMA on request. The Actuary should ensure that these individual quotations fall outside the standard pricing process before providing his/her recommendation. 6. The Actuary is required to specify in his pricing report the range of discounts that companies can adopt in their pricing based on discounts received on the existing portfolio. Companies should use the discount that they expect to receive from the Medical Service Providers in their quotation. The underwriters justification for the discount used should be fully documented, and provided to SAMA and the internal control functions on request.
It should be noted that SAMA imposes no restrictions on the form of the credibility formula to be adopted by each company, provided that it has been recommended by the Actuary. For instance, the Actuary may choose to vary the credibility formula by class of insurance, own or other insurer’s experience, good or poor experience. SAMA may challenge the credibility formula adopted if it considers that it has not been fully justified technically.
1.6 Pricing of Individual Medical Risks for Employed Expatriates and Dependents
Individual or Retail Medical Policies for employed expatriates and their dependents are being phased out for renewals with effect from 1 July 2016.
The employer will be required to replace them with corporate policies.
It may not he possible for an employer to obtain reliable claims experience if his employees have been covered by individual policies. In such cases insurance companies must price the policy using their corporate book rates.
Any corporate policy written without claims experience should be endorsed to make it clear that not disclosing claims experience may invalidate the contract, and entitle the Insurance company to charge more if it is subsequently finds that claims experience was available from a prior corporate policy.
Before issuing any quotation, the insurance company must verify whether or not the client has been insured under a corporate policy in the past, by utilizing the authorized access to data that will be provided by CCHI.
1.7 Other Individual Policies
Other individual policies are unaffected by the changes to medical expenses products for employed expatriates and their dependents.
It is expected that special consideration will need to be given to products for Saudi Arabian individuals and their families, as this market develops.