Some UAE firms shifting towards basic insurance plans for employees to cut cost

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Some UAE companies, particularly small and medium-sized enterprises (SMEs), are shifting towards leaner, basic health insurance plans to manage rising costs, while larger organisations are maintaining robust coverage to retain top talent.

Industry experts say most firms are not cutting benefits outright but are instead making targeted adjustments, such as increasing co-payments and optimising hospital networks to better align with business needs.

SMEs across the Gulf are facing mounting financial pressure amid the challenges triggered by a regional military conflict involving the US, Israel and Iran, prompting a closer review of insurance spending.

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Hitesh Motwani, deputy CEO of InsuranceMarket.ae, said companies are scrutinising their plans more closely while opting for incremental changes.

“Employers today are much more aware that reducing employee benefits is not a long-term solution. Health insurance is one of the most valued benefits, and any significant downgrade can impact morale, retention, and overall employee well-being. Many of our clients are consciously choosing to maintain strong coverage, while making balanced and thoughtful adjustments where needed,” he said.

Ralph J. Kabban, CEO of United Insurance Brokers (UIB), noted that geopolitical tensions are beginning to shape corporate risk strategies, particularly in trade- and logistics-exposed sectors.

Selective shift, not a widespread trend

Kabban said the market is not witnessing a blanket move from enhanced to basic policies.

“Instead, the market currently shows a more nuanced ‘cost optimisation’ trend, where some firms reduce coverage to manage premiums while others maintain or expand coverage due to rising risk exposure.”

He added that smaller firms are more likely to trim optional benefits or move towards basic plans to control costs, while larger corporates are restructuring programmes, increasing deductibles, and prioritising critical risk coverage rather than abandoning enhanced plans.

Neeraj Gupta, CEO of Policybazaar.ae, echoed this view, describing the trend as a “selective recalibration” rather than a broad-based downgrade.

“Some companies, especially cost-conscious SMEs, are moving towards leaner, basic plans, but larger organisations are largely holding on to enhanced coverage or restructuring benefits instead of downgrading outright. The focus is less on cutting benefits and more on optimising cost versus utilisation,” he added.

He identified three key drivers behind the shift: rising medical inflation, increased data-driven decision-making, and a more cautious macroeconomic environment.

“There are three clear drivers. Firstly, rising medical inflation has made enhanced plans slightly more expensive year-on-year. Secondly, companies are becoming more data-driven, closely tracking utilisation and questioning whether premium-heavy benefits are being fully used. Thirdly, in a more cautious macro environment, businesses are prioritising cost discipline and sustainability over expansive coverage,” added Gupta.

Despite the adjustments, employers are largely redesigning rather than removing benefits, including tweaking provider networks, co-pay structures, and optional add-ons.

Motwani reiterated that there is no widespread shift away from enhanced insurance.

Overall, he said the focus remains on striking a balance between cost control and meaningful employee benefits. “In times like these, strong and reliable insurance becomes even more important, not less.”