Overview

Domestic helpers’ insurance provides protection to all domestic helpers such as drivers, maids, cleaners, gardeners, etc.

the normal benefits of this insurance product have the following benefits:

  1. Corpse to be repatriated to the country of origin / primary citizenship, in case of death of the worker due to any cause;
  2. Repatriation of the worker to the country of origin / primary citizenship, in case of failure of the mandatory pre-visa medical examination;
  3. Repatriation of the worker to the country of origin / primary citizenship, in case of absconding – i.e. upon recovery of a worker that has previously been reported by the sponsor to the relevant authorities as an abscondee during the insurance

The requirements that the bidding insurance company has to fulfill usually are illustrated below:

These requirements envision a 360 degree, end-to-end insurance services characterized through the development and implementation of three distinct stages as mentioned above.

  • Scheme design mandates that all the three core benefits be covered in the product, the customer base should be exclusively restricted to domestic helpers and that the scheme should be built into the existing visa process.
  • For implementation of scheme, material considerations that determine the indicative premium rate should be taken into account but blending technique has to be applied that combines all these considerations into an overall uniform indicative rate. Proposed mechanism for servicing of claims and distribution strategy to be employed by the insurance company should also be detailed in the proposal.
  • Post Implementation stages requires that the insurer has comprehensive reporting capacity available so as to be able to capture the data adequately that will act as standard comparison between the expectations of the insurer and the actual results/experience from this scheme. Frequency of reporting should be monthly and particular attention has to be given for customer complaints. 

The management has set out three objectives in carrying out the domestic helpers pricing exercise:

  • To understand the burning cost (BC) for different parameters:
  • To identify segments which impact burning costs and ensuring that the prices quoted reflect these through a uniform blended rate
  • The indicative premium rates need to be adequate enough to enable the company to pay all retained claims and expenses on a sustainable basis. For this purpose, suitable loadings for costs and profit margin are built on the BC that are mutually beneficial and competitive to the potential customers, the Regulator and the company.  

Data Considerations

We understand that data is of paramount importance for the Regulator for this insurance scheme as mentioned that only information supplied can be used, and any use of other information not in the public domain will disqualify the bidder. Accordingly, only data provided by RFP and suitable data available on the public domain of internet have been used for the pricing exercise. Appendix 1- Public Data Sources of this report includes the list of references for data available on the public domain.  

The pricing is based on the data provided in the Appendix A of the RFP. For convenience it is reproduced below:

It is also mentioned that 48% of the low waged workers are males and 52% are females.

The top five countries to which domestic helpers belong are given in Appendix A of RFP as follows:

  • Philippines
  • Bangladesh
  • Pakistan
  • Indonesia
  • India
  • Pricing will be continuously monitored and revised as experience grows in UAE for this insurance scheme.

Pricing Methodology

Our approach to the pricing exercise, in stages is pictorially shown as follows:

Risk premium has been determined using the Burning Cost of each parameter which has been calculated as follows:

The frequency and Severity can also be separately calculated as follows:

The following parameters available in the data were analyzed in order to determine the impact of these parameters on the premium rate:

  1. Gender
  2. Country of origin
  3. Mortality rates
  4. Cost consideration of repatriation of corpse Vs repatriation of living human

These suitable parameters were then blended together into a uniform level of premium rate across all parameters.

Portfolio Burning Cost and Rate Determination

In order to arrive at adult mortality rates for male and female respectively, the World Health Statistics report of 2013, page 59 by World Health Organization[1] was employed. This report provided that adult mortality rate (probability of dying between 15 and 60 years of age per 1,000 population) for UAE, in 2011 for male was 85 and for female 64 respectively. This information was employed to determine the blended factor for gender parameter. 

As per the World Population Review, United Nations estimated that for 2014, 87% of UAE population consists of Expatriates. The Review also mentions that South Asian expatriates consist of 58% of the total expatriate population, while Other Asian consist of 17% and Western regions includes 8.5% of the expatriate population respectively. This information was utilized to determine the blended factor for country of origin parameter.

To arrive at cost or severity of repatriation of corpses, the national newspaper published online[2] was utilized. According to the article, repatriation of corpses cost around AED 10,000 to AED 20,000, varying by different regions, such as from UAE to Europe and UAE to Sri Lanka and  India etc. This information was corroborated with another news article on the Gulf News[3] and the costs were similar across both news sources.

Similarly, Airline ticket fees were extracted from two famous travel destination websites, namely makemytrip.com and skyscanner.com (see Appendix 1 for details). Appropriate search parameters were deployed such as economy plan, one-way ticket etc and the top 3 results of different airlines’ ticket prices for UAE to the top 5 nationalities which comprises the domestic helpers’ population were applied.  Both of figures mentioned in 4.3 and in this para were used to calculate the weighted average claim costs.

The blended factor for gender was 0.994. As this is less than 1, the interpretation is that female have lower mortality rates and have the larger proportion of the customer population, so while underwriting on a portfolio basis 0.994 blended rate should be applied.

The blended factor for country of origin is also less than 1 at 0.895. The justification is that on a portfolio level of underwriting, major proportions of nationalities come under low air-line fees regions such as South Asia and Other Asia.

The product has 3 benefits included that were elaborated in section 1.2

Total Portfolio BC of AED 5.46 per person per annum shows the minimum amount that has to be charged in order to settle and administer claims in relation to domestic helpers insurance scheme.  This was calculated after taking into account all the relevant blending factors.

The burning cost has then been loaded for expenses, commissions and profit. The Indicative Standard Premium Rate is determined after loading for the following factors:

  • A margin for profit and contingency of 5%;
  • A margin for expenses equal to 2.5%;
  • A margin for commissions equal to 7.5%.
  • The following formula is used to calculate the Indicative Standard Premium

Hence, the Standard Premium after loadings, can be shown as follows:

Conclusion

We believe that final indicative standard premium of AED 6.42 per annum per person for domestic helpers’ insurance scheme, along with the pricing procedure and assumptions are sound and workable. Further pricing review can be done on a regular basis as experience develops in UAE.

Appendix 1- Public Data Sources

Particulars

Website

Repatriation of corpses

www.thenational.ae

www.gulfnews.com

UAE population nationality breakdown

www.worldpopulationreview.com[4]

Adult Mortality for UAE by gender

www.apps.who.int

Air fares

www.makemytrip.com

www.Skyscanner.com

Air Tickets

Search parameters:

  • Country selected UAE
  • Currency as AED
  • One-way only
  • Economy plan
  • one adult
  • Dates of flight in ascending order from immediate to later dates.
  • Date of search: 6th November 2014

Top 3 results selected; if results shown are less than 3, then selected as number of prices as given in the websites.


[1] http://apps.who.int/iris/bitstream/10665/81965/1/9789241564588_eng.pdf

[2] http://www.thenational.ae/news/uae-news/dh20-000-to-send-a-body-home-from-uae-for-burial

[3] http://gulfnews.com/business/your-money/the-cost-of-dying-what-to-expect-when-it-s-not-expected-1.706848

[4] This website uses population data provided by United Nations