The government of the United Arab Emirates in Dubai recently made it compulsory for all citizens and visitors to have medical and health insurance.

Although this news has been welcomed by the insurance companies, it seems that the good news is somewhat tempered.

The insurance providers are concerned that the potential profit that the new law offers will be very thin because of the stringent regulation that the Dubai government are imposing.

The new regulations state that there must be a cap on premiums, but analysts believe that there is a risk that there will be a large number of claims. This will inevitably cut into the profitability of the insurance companies.

Before the new law was enacted by the Dubai government, health and medical insurance was voluntary. The Middle Eastern country doesn’t have a state funded health service.

The new mandatory cover is also cheaper than the voluntary premiums. Some experts, however, believe that employers who offer health insurance as part of the employment package may choose to drop this.

Alternatively, it is more likely the employers will trade down by paying just the mandatory cover.

Health insurance is a growing problem nowadays. People are living longer but the costs of providing good health care are also increasing.

While the mandatory aspect of the UAE system has been welcomed, some believe that the government has no real understanding of the costs involved in providing both health care and health insurance.

Others though may take the view that the cost of insurance is more about boosting profits than providing a proper safety net.