Life Insurance Association of Malaysia (LIAM) said the industry’s biggest cost driver is the sharp increase in medical claims post-Covid, primarily due to higher volume of hospital admissions rather than the cost of care. Citing industry data, LIAM said that the claims increased 73 per cent from 2022 to 2024, compared to a 21 per cent rise in premiums — a gap that has put “a lot of pressure” on insurers.
LIAM described Bank Negara Malaysia’s (BNM) interim measures to cap premiums as “not sustainable”, with the industry now under a “ticking clock” to come up with “solutions” to help alleviate some of the problems over the next couple of years. BNM’s emergency measure caps premium increases depending on the level — if the total increase is 20 per cent or less, it’s spread out over three years; if it’s between 20 to 40 per cent, it may be spread out over five years; if it exceeds that, it must be explicitly approved by the regulator.
The industry is exploring long-term reforms, including co-payments, mandatory use of generic drugs, publishing average costs of common procedures, and redesigning medical plans with more sustainable benefit structures.
One-Night Hospital Stays, Volume Of Care Fuel Claims - According to LIAM’s internal data, the average annual increase in medical claims over the past seven years — including during the Covid period — was 14.34 per cent. This figure does not account for inflation. But since Covid, claims have escalated.
For medical claims, even pre-Covid, [it] was beginning to become a problem, and medical premium increases are not new. They’ve been happening for many, many years. But Covid, there was a bit of a respite. In 2020, nobody wanted to go to the hospital, so claims actually went down by 8 per cent.
In 2021, they were up modestly, but in 2022, 2023, and 2024, they spiked to unprecedented levels. They spiked 33.7 per cent in 2022, and I can tell you from our data, they’re driven mostly from volume. The average cost of care has played a much smaller part of the claims inflation than the volume piece. However, the trend has been going down steadily since, with first quarter numbers for this year looking encouraging.
The high number of one-night hospital admissions — which made up 35 per cent of total admissions between 2018 and 2024 — as a potential red flag, suggesting that some of these admissions may not have been medically necessary.
Most plans will not pay a claim because they weren’t admitted. And so the doctor says, ‘Why don’t we admit you overnight for observation?’ and the claim is paid. That case could have probably gone to a general practitioner (GP) clinic, but instead they sought treatment at a hospital where they were admitted to pay the claim, and that adds to the claims inflation.
Missteps In Medical Plan Design, Poor Communication On Premium Hikes - the design of insurance plans has contributed to the overuse of health care services. It was missold to some degree, referring to the early promotion of cashless medical cards in Malaysia. Agents could say, this is like a credit card. You can go into the hospital and basically you can get anything you want.
And over the years, companies have tried to come up with richer and richer plans, bigger and bigger benefits – you have some plans that have a RM10 million annual limit, unlimited lifetime benefits, and all those things have contributed to the encouragement of consumption and provision of services.
Much of the industry’s communication around premium hikes has failed to gain public trust.
There is some improvement needed in the way insurance companies and the industry communicate the need for rate increases. It seems like in hindsight, you just get a letter – that says your premium is being increased because of medical inflation, and that’s just insufficient.
Basic Medical Plan In The Works - LIAM is now working with BNM and the Ministry of Health (MOH) to develop a basic long-term medical insurance plan for those seeking lower-cost coverage.
This is something similar that has been done in Hong Kong, in Singapore – it’s really to make sure that people who want to maintain access, regardless of how expensive premiums can be, this is the lower-end choice that allows people to stay in the system and they can access private care and they could also choose to get higher, more expensive and comprehensive coverage if they want to do so.
The association also supports diagnosis-related groups (DRG) pricing, which will be used initially in the government’s pilot Rakan KKM program, expected to be rolled out by the end of this year.
Most plans will not pay a claim because they weren’t admitted. And so the doctor says, ‘Why don’t we admit you overnight for observation?’ and the claim is paid. That case could have probably gone to a general practitioner (GP) clinic, but instead they sought treatment at a hospital where they were admitted to pay the claim, and that adds to the claims inflation.
Missteps In Medical Plan Design, Poor Communication On Premium Hikes - the design of insurance plans has contributed to the overuse of health care services. It was missold to some degree, referring to the early promotion of cashless medical cards in Malaysia. Agents could say, this is like a credit card. You can go into the hospital and basically you can get anything you want.
And over the years, companies have tried to come up with richer and richer plans, bigger and bigger benefits – you have some plans that have a RM10 million annual limit, unlimited lifetime benefits, and all those things have contributed to the encouragement of consumption and provision of services.
Much of the industry’s communication around premium hikes has failed to gain public trust.
There is some improvement needed in the way insurance companies and the industry communicate the need for rate increases. It seems like in hindsight, you just get a letter – that says your premium is being increased because of medical inflation, and that’s just insufficient.
Basic Medical Plan In The Works - LIAM is now working with BNM and the Ministry of Health (MOH) to develop a basic long-term medical insurance plan for those seeking lower-cost coverage.
This is something similar that has been done in Hong Kong, in Singapore – it’s really to make sure that people who want to maintain access, regardless of how expensive premiums can be, this is the lower-end choice that allows people to stay in the system and they can access private care and they could also choose to get higher, more expensive and comprehensive coverage if they want to do so.
The association also supports diagnosis-related groups (DRG) pricing, which will be used initially in the government’s pilot Rakan KKM program, expected to be rolled out by the end of this year.
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