Indonesia Medical Cost Inflation Year 2025 -13.5%

Indonesia's health insurance sector is under sustained pressure from medical inflation running well above general price increases, a trend that is reshaping underwriting economics and drawing direct regulatory intervention.

Medical cost inflation in Indonesia reached an estimated 13.6% in 2025, the highest rate in Asia, according to the Global Asia Insurance Partnership (GAIP). Mercer Marsh Benefits, meanwhile, put the country's projected medical trend rate at 19% for 2025, the year-on-year increase in claims costs per insured person. Asia-Pacific has recorded double-digit medical trend rates for six consecutive years, with analyst projecting a 12.5% average rate across the region in 2026.

Product exits signal unsustainable claims ratios - The gap between claims costs and premiums has already forced product exits. Around five to six non-life insurance companies stopped selling health products by early 2026, according to the Indonesian General Insurance Association (AAUI). Claims ratios had consistently exceeded 90% across parts of the market, a level that Indonesia's Financial Services Authority (OJK) acknowledged was unsustainable.

The structural drivers are well established. Rising utilization, an ageing population, and the growing burden of non-communicable diseases such as diabetes and hypertension are all contributing to cost escalation. The devaluation of the Indonesian rupiah (IDR) compounds pricing pressure, as most pharmaceutical raw materials and medical devices are sourced from abroad.

Anaalyst projects gross claims in the personal accident and health (PA&H) segment to grow from IDR8.6 trillion (US$535.9 million) in 2025 to IDR13.1 trillion (US$816.3 million) by 2029. That represents a compound annual growth rate of 10.9%.

Reinsurers carry share of deteriorating books - For reinsurers, the deteriorating claims environment creates direct exposure through quota share and excess-of-loss arrangements on health books. As cedants face pressure on guaranteed-premium products, where in-force policies cannot be repriced without regulatory constraints, reinsurers absorb a proportional share of the adverse experience.

Asia's health protection gap reached US$258 billion in premium-equivalent terms in 2024. That was up 21% from 2017, with chronic conditions and critical illnesses contributing almost equally to household financial stress.

OJK introduces co-payments and repricing limits - The OJK moved to address the imbalance in late 2025. Its POJK No. 36 of 2025, effective January 2026, introduced mandatory co-payments of at least 10% of each claim. The cap is IDR300,000 for outpatient care and IDR3 million for inpatient treatment.

The regulation also restricts health product repricing to once per year, with mandatory written notice to policyholders at least 30 days in advance. The OJK said the measures were intended to curb overutilization and prevent moral hazard.

Insurers have until December 2026 to adapt existing products to the new requirements. The framework also mandates medical advisory boards and stronger utilization review processes.
The requirements raise the operational bar for smaller carriers already under capital pressure.

Reinsurance role extends beyond risk transfer - Indonesia Re, the state-owned national reinsurer, has described the reinsurance function in this environment as extending beyond risk transfer. It cites claims experience analysis, disease trend monitoring, portfolio profitability assessment, and technical support for rate setting as areas where reinsurers add value.

The private health insurance market remains relatively small against a large state base. By October 2025, 283 million participants held coverage under BPJS Kesehatan, the national scheme, representing 99.3% of the population.

Private products largely serve as supplementary cover for access to private hospital facilities and specialist services. The private market was valued at US$1.63 billion in 2025 and is projected to reach US$2.54 billion by 2031, a 7.5% compound annual growth rate.

The regulatory and structural changes are expected to improve claims ratios over time but introduce near-term complexity for both insurers and reinsurers. Tighter co-payment rules may suppress utilisation. The underlying cost trends driven by chronic disease, medical technology, and currency exposure remain structural rather than cyclical.

The period ahead is likely to involve closer collaboration with cedants on product design, more granular pricing assumptions, and greater scrutiny of claims management governance. Those conditions typically favor reinsurers with strong local data infrastructure and cedant relationships over those writing the line from a distance.

Malaysia MediAsas

The government will launch a pilot program for its Base Medical and Health Insurance and Takaful (MHIT) plan in the Klang Valley by the end of July, with monthly premiums expected to start from around RM60.

Knowns as MediAsas, it will be offered as a standalone medical insurance and takaful protection plan with two product options — MediAsas Teras (a standard plan) and MediAsas Fleksi (a standard-plus plan). The scheme will provide medical coverage for individuals up to the age of 85.

The premiums will be determined based on the latest medical claims experience and healthcare cost inflation trends, with indicative premiums expected to remain within the target monthly range of around RM60 to RM550 for individuals within the entry age of up to 70 years. 

Final pricing will be confirmed before the nationwide implementation in January 2027. The pilot phase will run from end-July until October 2026.

Six insurers and takaful operators will participate in the pilot program togrther with selected hospitals in the Klang Valley. They include AIA Bhd, Allianz Life Insurance Malaysia Bhd, Great Eastern Life Assurance (Malaysia) Bhd, Prudential BSN Takaful Bhd, Etiqa Family Takaful Bhd and Syarikat Takaful Malaysia Keluarga Bhd.

The government said the pilot program will test "operational readiness, including systems integration, customer experience and operational processes" in a controlled environment. Feedback gathered during the pilot phase will be used to refine implementation arrangements before the nationwide rollout.

The Base MHIT initiative forms part of the government's broader Reset strategy, undertaken jointly with Bank Negara Malaysia, to address rising medical inflation and strengthen the long-term sustainability of Malaysia's healthcare system.

The strategy focuses on value based healthcare in improving patient outcomes, optimizing cost-effective healthcare services and enhancing access to quality care.

FWD Launched Cancer MultiCover Insurance

FWD Singapore has launched FWD MultiCover CI, a new critical illness policy designed to provide ongoing payouts rather than terminating after the first claim. The product launch comes as national figures show Singapore’s five-year cancer survival rate rose from 53% in 2008 to 2012 to 61% in 2019 to 2023.

Over the same period, cancer mortality dropped from 91 to 72 deaths per 100,000 people.
With patients living longer post-diagnosis, the insurer aims to help families cover long-term income loss, caregiving expenses, and prolonged recovery costs.

The policy covers up to 166 medical conditions across early, intermediate, and late stages. Depending on specific condition limits, policyholders can claim up to a total of 900% of their Sum Insured across all benefits.

Under the core Critical Illness Benefit, customers can make up to six claims totaling 600% of the Sum Insured, with a one-year waiting period between claims.

Early and intermediate stages pay out 100% of the Sum Insured, whilst late-stage diagnoses pay 200%.

For specified late-stage illnesses or recurrences, a Booster Benefit offers an additional 150% of the Sum Insured per claim for up to two claims, subject to a two-year waiting period.

Customers facing late-stage diagnoses can also select the Accelerated Care Option to receive an immediate 75% payout instead of keeping the booster benefit for future recurrences.

Additionally, a two-tier Intensive Care Unit benefit provides payouts up to 120% of the Sum Insured for severe hospital stays, even if the underlying illness is not listed as a critical condition.

Check Unclaimed Money Through Semak Kasih

Bank Negara Malaysia (BNM) today launched the ‘Semak Kasih’ portal to make it easier for beneficiaries to check unclaimed insurance policies or takaful certificates of their family members. The portal was developed to help beneficiaries verify whether they have insurance or takaful coverage and contact the relevant provider for further action.

Approximately 50,000 insurance policies and takaful certificates involving death benefits have yet to be claimed by beneficiaries. Several efforts have been undertaken by insurance and takaful companies, including sending letters and using agents to contact beneficiaries.

To improve the efficiency of the benefit claim payment process, this newly launched portal makes it easier for beneficiaries to check the existence of coverage and contact the relevant provider for further action to ensure that benefits reach the qualified family members.

Malaysians should strengthen financial protection through insurance or takaful, as well as increase their financial literacy to face economic challenges and the rising cost of living. Insurance or takaful protection can help individuals and families when facing disasters such as illness, accidents, or fires, and help ensure the welfare of surviving family members

Japanese Insurers Eyeing Foreign Aquisition

Japanese life insurers are projected to continue buying foreign insurance companies to drive growth, as the domestic market for profitable protection-type policies is expected to peak within the next few years due to Japan's shrinking population.

Instead, earnings growth will increasingly depend on wider investment margins, which are being lifted by the rising yen bond yields. Japanese life insurance companies are also expected to maintain strong financial foundations through March 2027. Analyst forecasts that the insurers will hold enough capital to support their current credit ratings. This stability to a steady build-up of core capital and the issuance of hybrid financial instruments.

Movements in Japanese government bond yields are expected to have a minimal direct impact on the insurers' capital and earnings. Under Japanese accounting rules, both yen-denominated liabilities and bonds are recorded at book value using amortized cost.

Furthermore, when bond yields rise, the economic value of insurance liabilities falls faster than the value of the bonds themselves, limiting the negative impact. Despite rising bond yields, customer cancellations remained stable. The rate of surrendered and lapsed policies was 4.6% in the financial year ending March 2026, up slightly from 4.3% the previous year.

Fitch noted that consumers in Japan do not typically buy life insurance products for investment yields, which helps keep these rates steady.

Daya Kerjaya Scam

Workers received only a one-off token payment, yet their names were used to claim the full employment incentive under the Social Security Organisation's (PERKESO) Daya Kerjaya 2.0 program, according to the Malaysian Anti-Corruption Commission (MACC).

A one-off token payment was given to the workers, while full claims were submitted. In other words, the workers only received a token payment and not the full amount that was claimed.
Investigators also found that information belonging to disabled people had been misused for payments to other parties.

Accountants of sole proprietorships had submitted applications on behalf of company owners who received commissions despite having no knowledge of the workers registered under the program. The use of individuals' information without consent, as well as the misuse of data belonging to the program's target groups, are among the matters being examined in the investigation.

The Daya Kerjaya 2.0 program provides a government hiring incentive of RM1,500 a month for up to six months and was introduced to help vulnerable groups secure employment. The target groups include disabled people, parolees and senior citizens aged above 60.

On June 11, the MACC announced that it had uncovered a syndicate believed to have submitted fraudulent claims involving 143 companies and claims worth about RM9mil under the program.

Healthcare Partners Protocol & Solutions Committee

Five medical and insurance/takaful associations said initiatives are being implemented to enhance communication and operational efficiency among doctors, hospitals, insurers and takaful operators.

The five are the Malaysian Medical Association (MMA), the Association of Private Hospitals Malaysia, Life Insurance Association of Malaysia (LIAM), Malaysian Takaful Association, and Persatuan Insurans Am Malaysia.

In a joint statement today, they said the initiatives are to improve the overall customer experience across the healthcare ecosystem. This will be done via the Healthcare Partners Protocol & Solutions Committee (HPPSC) platform.

The four broad categories of initiatives include improving communication between medical practitioners and insurers, takaful operators; enhancing transparency in panelling and review processes for cashless facility; improving medical and health insurance / takaful claims management operational efficiency; and streamlining the guarantee letter issuance process.

A dedicated "doctor-to-doctor" hotline was set up by insurers and takaful operators in April 30, 2026, to support and address claim enquiries and enable direct discussions between medical practitioners and insurers and takaful operators' medical advisory teams.