KUALA LUMPUR (Sept 24): Malaysia’s insurance and financial services inflation is expected to remain on an upward trajectory in the coming months, economists said, following sharp increases in July and August driven by higher hospital benefits and motor insurance premiums.
The inflation for the insurance and financial services group rose 5.5% in July and 5.6% in August, the Department of Statistics Malaysia reported on Tuesday. Before that, the segment’s inflation rate held steady at 1.5% between February and June, after registering 0.6% in January.
“Judging from the breakdown within insurance and financial services which accounted for 2.7% of the consumer price index (CPI), the health insurance sub-index (1.3% of the total CPI) jumped 14.7% year-on-year over two consecutive months. Rising medical insurance premiums were the main driver,” said Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid.
Asked if medical insurance premiums would continue climbing, he said: “It seems that way if the government’s intervention (to curb the rising medical costs) takes a while.
“Ideally, the intervention has to be accelerated,” he told The Edge.
Similarly, UOB Malaysia senior economist Julia Goh and TA Securities economist Farid Burhanuddin do not expect medical and motor premiums to come down anytime soon.
However, Goh noted that upcoming measures — including the basic medical and health insurance/takaful (MHIT) product, slated for roll-out in the second quarter of next year, and the diagnosis-related groups (DRG) payment model in 2027 — could help moderate the pace of increases in the inflation rate of insurance and financial services.
“Hopefully the new measures (such as MHIT and DRG) can help keep the rise in check. Maybe we should also watch for announcements in Budget 2026,” Goh added.
To rein in higher medical costs, the government is rolling out its Reset strategy, which includes introducing a basic MHIT product, mandating price transparency, enhancing interoperability of electronic medical records, setting up Rakan KKM private wings in public hospitals, and adopting a DRG payment model.
According to a joint Bank Negara Malaysia (BNM) and Health Ministry presentation at a media workshop in August, MHIT is slated to be launched in the second quarter of 2026. Meanwhile, the DRG — a fixed-fee, diagnosis-based hospital payment model — is targeted for 2027.
The government originally sought to implement the DRG by mid-2025, but Deputy Health Minister Datuk Lukanisman Awang Sauni told Parliament last month that more time was needed to build the system, finalise cost models, integrate hospital data and run pilot tests.
Malaysia’s medical inflation jumped to 15% in 2024 — above the Asia-Pacific average of 10% — compared with 12.6% in 2023 and 10% in 2022.
In response, BNM, which regulates insurers, announced interim measures in December last year. These include spreading premium increases over at least three years, pausing adjustments for policyholders aged 60 and above, and allowing reinstatement of lapsed policies without additional underwriting.