KUALA LUMPUR (Dec 20): Bank Negara Malaysia (BNM) has announced a series of interim measures to address the burden of rising medical insurance premiums on policyholders. These measures include spreading out premium increases over at least three years, and pausing certain premium adjustments for individuals aged 60 and above.

These interim measures also allow for the reinstatement of policies without additional underwriting requirements for those whose policies lapsed in 2024 due to premium revisions.

"These interim measures have been introduced to alleviate the immediate financial impact on policyholders and preserve medical and health insurance/takaful (MHIT) coverage," BNM said in a statement on Friday.

"However, broader measures to address rising medical costs in Malaysia are urgently needed to manage future premium adjustments and ensure that MHIT products continue to be affordable for the Malaysian public," the central bank said.

Last month, following news reports of spikes in medical insurance premiums, BNM told insurers and takaful operators to be “more reasonable” with their repricing strategies, including stretching the increases of premiums over time as well as offering “viable” and “meaningful” options. 

Insurers in Malaysia have complained of escalating claims and medical inflation over the years and, in response, are raising their premiums while introducing co-payment options that will result in cost-sharing with policyholders.

Healthcare providers, meanwhile, blamed rising costs. The Association of Private Hospitals of Malaysia, which represents more than 150 hospitals in the country, said it does not rake in exorbitant profit, as the industry’s profit-after-tax margins of 9%-11% are modest compared to other sectors.

In its Friday statement, BNM noted that medical cost inflation in Malaysia has reached 15% in 2024, significantly exceeding the global average of 10% and the Asia-Pacific average of 11%. BNM said this surge was driven by factors such as advancements in medical technology and the increasing prevalence of non-communicable diseases, both of which have led to greater demand for healthcare services.

"As a result, the claims paid out by insurers and takaful operators (ITOs) have grown faster than the premiums collected. While ITOs maintain reserves to cover unexpected increases in medical claims paid, this cannot be sustained if the cost of claims continues to increase beyond reasonable estimates," the central bank said.

Under the interim measures agreed upon with the insurance and takaful industry, ITOs will spread out premium increases over a minimum of three years. This measure, which will be in effect until end 2026, aims to ensure that the majority of policyholders experience annual premium increases of less than 10% due to medical claims inflation.

And policyholders aged 60 and above who are covered under the minimum premium/contribution plan of the MHIT product that they purchased will benefit from a temporary one-year pause on premium adjustments related to medical claims inflation, starting from their policy anniversary.

For individuals whose MHIT policies lapsed in 2024 due to previous premium revisions, reinstatement will be permitted without any additional underwriting requirements.

Policyholders who choose not to continue with their repriced plans will also have the option to switch to alternative MHIT products offering the same or lower premiums. These alternative products, available from ITOs by the end of 2025, will not involve any underwriting or switching costs.

The central bank said it will monitor the progress of these reform efforts and conduct periodic reviews of the interim measures in line with advancements in the broader healthcare landscape.

Policyholders can expect to receive communications from their respective ITOs regarding these changes starting Jan 15, 2025.

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