The industry is said to be under immense pressure due to post-pandemic claims surges and persistent medical inflation, which LIAM claimed could reach up to 30%. These estimates are based on two key assumptions – that medical inflation does not ease, and the premium cap remains in place for three years.
Capping Premium Hike - The cap, introduced by BNM as an interim measure, limits annual increases in premiums and contributions for medical and health insurance or takaful products to below 10% for at least 80% of policyholders until the end of 2026.
The takaful sector alone is projected to incur potential losses of RM800 million. At the same time, the broader insurance industry could face up to RM4.5 billion in losses due to uncollected contributions under this pricing control.
In 2023, 25 out of every 100 policyholders were hospitalized, compared to just 10 or 11 per 100 before the pandemic. There was a spike in hospital admissions post-Covid, which has not returned to pre-pandemic levels. This has driven claims up substantially.
To address the affordability gap, the proposed basic insurance plan would offer more accessible coverage options for those struggling with premium hikes. The basic plan is designed as an alternative for those who want to maintain access to healthcare but are challenged by cost.
The industry also advocates for structural reform in how hospitals charge for services. Currently, hospitals operate on a fee-for-service model, which can incentivize overcharging.
LIAM is proposing a shift towards Diagnosis-Related Group pricing, a fixed-package approach based on diagnosis complexity and comorbidities. This would push providers to manage costs more efficiently while still delivering quality care. LIAM also called for greater price transparency across the healthcare system.
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