Bank Negara Malaysia (BNM) has announced substantive but interim measures to help health insurance policyholders affected by the increase in premiums of their medical and health insurance and takaful policies (MHIT).
The BNM in a detailed media release issued on 20 December 2024 seeks to alleviate the immediate financial impact to policyholders and preserve MHIT coverage. The release, however, says that broader measures are urgently needed to address the rising medical cost in Malaysia. It said concrete efforts are required to ensure that MHIT products continue to be affordable for the Malaysian public.
The cost of healthcare in Malaysia has grown significantly over the years, with medical cost inflation reaching 15% in 2024 – well above the global and Asia Pacific average of 10%. This rise is driven by factors such as advancements in medical technology and the increasing prevalence of non-communicable diseases, 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. Hence, periodic adjustments to MHIT premiums are necessary to ensure that policyholders’ claims can continue to be met.
Bank Negara Malaysia governor Dato’ Seri Abdul Rasheed Ghaffour said, “We need to address the root causes of rising medical and health insurance and takaful premiums which are driven by higher medical costs and utilisation of medical services. The design of MHIT products must also be improved to make them more sustainable and aligned with value-based healthcare that prioritises better health outcomes. This is a complex challenge that requires the concerted action of all stakeholders across the healthcare ecosystem.
He said, “These interim measures that we have announced will provide some temporary support to policyholders, but broader health reforms must be expedited with a commitment to achieve clear outcomes in the coming years. We are working closely with relevant stakeholders and all parties have been supportive and committed to work out a long-term sustainable solution to this complex issue.”
The BNM release said that instead of raising the premiums substantially at one stroke, insurance companies will spread out the increase in premiums over a minimum of three years. This measure will remain in place until the end of 2026.
According to BNM, this measure will result in at least 80% of policyholders experiencing yearly premium adjustments, due to medical inflation, of less than 10%.
For policyholders aged 60 years and above who are covered under the minimum plan within the MHIT product that they purchased, ITOs will temporarily pause premium adjustments due to medical claims inflation for one year from their policy anniversary.
The interim measures above are not applicable to premium increases that may apply when a policyholder moves to a higher age band. This will be managed separately by the ITOs.