KUALA LUMPUR (Dec 3): The Life Insurance Association of Malaysia (Liam) said it is still in discussion with Bank Negara Malaysia (BNM) about measures that can be taken to ease the burden on policyholders following the unprecedented rise in medical claims over the past few years.
In a statement Tuesday, Liam clarified that it never said there would be "no immediate change" to the recent rate hikes of medical insurance premiums that ranged from 40% to 70%, as reported by the Business Times after an interview with Liam's chief executive officer Mark O'Dell.
O'Dell was cited as saying that BNM's statement last week, in which it urged insurance companies to review their repricing strategies, had referred to future repricing adjustments, and not a review of the recent premium hikes for medical and health insurance/takaful (MHIT), which led to Liam's clarification.
In the statement issued by BNM, which regulates the insurance industry, it also told insurers and takaful operators to be 'more reasonable' with their repricing amid public concerns over a spike in premiums of medical and health insurance products. It had said this can be done by stretching the increases of premiums over time as well as offering "viable" and "meaningful" options. Such options, according to the central bank, would be announced by the industry soon.
“Over the period of 2021 to 2023, unprecedented cumulative medical claims costs inflation of 56% placed many insurers in a critical position on their medical books of business, having to manage a high ratio of claims over premiums. The rising cost of care at private hospitals as well as the sharp increase in the number of policyholders seeking treatment have driven up claims and premiums.
“Insurers have an obligation to keep their respective medical insurance funds solvent. Insurers have agreed to manage future significant rate revisions to ease the burden on policyholders resulting from higher claims,” said Liam in its Tuesday statement.
Liam also said insurers are also actively engaging with their customers to address the impact of repricing during this period. "They are also providing various options to ensure policy continuity and maintain affordability."
The association further said that the life insurance industry has been working closely with the central bank, the Ministry of Health, and the Association of Private Hospitals Malaysia to develop long-term strategies to mitigate the financial impact of rising healthcare costs and medical claims.
Since September, insurers and takaful operators have been required to offer consumers the option to purchase medical insurance products with a co-payment feature, which basically gives policyholders the option to share in the medical costs as a way to reduce their premiums. In short, those who do not take up the co-payment feature will have to pay higher premiums for their medical insurance.
In a joint statement last week, Liam, together with the Malaysian Takaful Association and Persatuan Insurans Am Malaysia said the premium repricing was an "unavoidable measure" driven by rising medical treatment costs, advanced healthcare technologies and increased use of healthcare services.
In 2023 alone, Malaysia experienced medical cost inflation of 12.6%, according to BNM, more than double the global average of 5.6%.
The Association of Private Hospitals Malaysia, which represents over 150 hospitals nationwide, claimed last month that the healthcare industry does not generate excessive profit. It said the industry's profit-after-tax margins of 9%-11% are relatively modest compared to other sectors.