SECOND OF A THREE-PART SERIES
WHILE Malaysians are becoming more aware of the need to have medical insurance/takaful, they also have to contend with increasing premiums/ contributions. This second article of a three-part series on medical insurance/ takaful in Malaysia examines the drivers behind this current scenario.
When you or your loved one is sick or hurt, getting adequate and timely medical care is a must. More and more Malaysians are turning to private doctors and hospitals because of the greater number of qualified specialists on staff, newer facilities and a full suite of diagnostic and procedural equipment.
Going to a private hospital however can be an expensive affair. For this reason, a growing number of consumers are purchasing medical insurance/ takaful to cover the costs when the need arises.
Medical insurance/takaful can come in all shapes and sizes. These days most policies/certificates are comprehensive and come with medical cards, allowing the policyholder/certificate holder to be admitted to hospital and doctor charges guaranteed by the insurance company/ takaful operator.
The most common coverage taken today will often pay for the entire hospital bill.
Although they are popular, these policies/certificates have seen premium/ contribution increases in recent years. Before we look at the drivers behind the increases, we must first understand that the cost of comprehensive medical policies/certificates would automatically rise as you get older. With a typical standalone policy/certificate, you can expect your premiums/contributions to go up, often according to five-year age bands.
If you have taken your medical insurance/takaful as a unit deducting rider on an investment linked policy, the monthly cost for your coverage would gradually increase throughout the policy/certificate term. This pricing practice is in line with the fact that the older you get, the higher the chances that you’d make a claim.
All medical plans in Malaysia are priced carefully by qualified actuaries. Using the best available data and experience on the expected frequency and severity of potential hospitalisation, premiums/contributions are set according to your age and gender.
These premiums/contributions are drawn up based on a variety of assumptions including the probability of a yearly medical inflation. The pricing is then reviewed periodically. If actual claim volume differs from the assumptions, insurers would then consider to revise the premiums/contributions charged.
Medical inflation is often higher than other goods and services due to improvements in technology and treatments, new drugs, people living longer and requiring more medical care, etc. Insurance companies/takaful operators might reasonably price an inflation rate of six to eight per cent to cover medical inflation.
But with Malaysia having experienced one of the highest medical inflation rates in Asean in recent years, the expected increase in claims for 2019 is 13 per cent. As a result, insurance companies/takaful operators have had to revise their premiums/contributions upwards.
In response, the industry has formed a joint task force to understand the issue better and address it. The Life Insurance Association of Malaysia (LIAM), the Malaysian Takaful Association (MTA) and the Persatuan Insurans Am Malaysia (PIAM) have jointly commissioned an independent consultant to conduct a comprehensive study on the drivers of medical claims inflation.
The outcome will be used to produce a plan, together with other industry stakeholders, to reduce the high undesirable rate of premium/contribution increases.
The bottom line is to be a wise consumer. Remember that, even in the case where your hospital bill will be covered in full by the insurance company/takaful operator, the cost of each treatment will count towards your yearly and lifetime limits. In the end, lower claims will result in lower premiums for all policyholders.
*The final article in this series will cover tips and issues revolving around making claims.
*This article is brought to you by the Life Insurance Association of Malaysia (LIAM), Persatuan Insurans Am Malaysia (PIAM) and Malaysian Takaful Association (MTA).