A Quantitative Model to Identify Key Determinants for Health Insurance Claims in the Kingdom of Saudi Arabia

Abstract

The insurance sector in the Kingdom of Saudi Arabia has been growing in recent years, particularly within the fields of health and automobile insurance. However, some insurance companies have incurred excessive losses in health insurance and exited the market as their financial position has been affected. Therefore, this paper explores the determinants of individuals’ health insurance that affect their claims. In other words, what are the demographic factors for policyholders that affect the levels of health insurance claims within the Kingdom of Saudi Arabia? An analysis of the risk factors that affect such claims are useful in risk control, as well as in managing the risks of adverse selection and assisting insurance companies to apply proper underwriting procedures. A number of statistical models are used to analyze the determinants of health insurance claims; the paper suggests a statistical (logistic) model for the primary determinants of these claims. This model has revealed that five significant demographic factors – age, gender, nationality, and two types of marital status – may affect the classification of individual health insurance claims by an overall percentage of 90.8%.These demographic factors may be used as a guide for underwriters in making crucial and successful decisions while rating new health insurance policies or renewing current policies.

Keyword: health insurance, claim amount, logistic model, demographic factors, Saudi Arabia