Should Bank Negara reject the proposed 40-70 per cent medical insurance premium hike?

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Bank Negara Should Reject the Proposed 40-70 Per Cent Medical Insurance Premium Hike

Bank Negara is currently considering a significant proposed increase in medical insurance premiums, ranging from 40% to 70%, for the upcoming year. This proposed hike is presented as a measure to counteract a projected 15% rise in medical costs within Malaysia for 2025, which is notably higher than the global increase of 10% and the Asia Pacific region's 11.1%. However, the substantial disparity between the proposed premium increase and the actual rise in medical costs raises critical questions about the necessity and fairness of such a drastic adjustment.
Disproportionate Premium Increase Compared to Medical Cost Rise

The proposed 40-70% hike in medical insurance premiums significantly outpaces the stated 15% increase in gross medical costs for 2025. This discrepancy prompts an examination of the underlying factors driving medical costs in Malaysia and why they are escalating at a rate higher than regional and global averages. The fundamental question arises as to why policyholders and the public should be solely responsible for rectifying failures in cost containment within the private health and life insurance sectors.
Concerns Over Potential Abuses in Medical Cost Imposition

There are valid concerns regarding regulatory oversight and the potential for abuses in the way medical costs are imposed by private hospitals and the life insurance industry. Evidence suggests that the use of guarantee letters (GLs) for medical treatments can lead to substantially higher costs compared to direct payment and subsequent claims. For instance, a dengue treatment with a GL incurred costs of RM 4,978, which is four times more than the RM 1,288 for a patient who paid upfront and claimed. Similarly, pneumonia treatment using a GL cost RM 6,859, three times the RM 2,654 for those who paid first and claimed. These figures highlight the need for greater transparency and control over medical billing practices.
Healthy Profitability of Insurers Contradicts Need for Large Hike

The argument for such a substantial premium increase is further weakened by the healthy profit growth reported by life insurance companies. In the first half of 2024, the overall profitability of life insurance and family takaful funds reached RM8.4 billion, more than double the RM3.2 billion recorded in the second half of 2023. This robust financial performance questions the urgency and justification for a massive 40-70% premium hike, especially when considering that average salary increases do not approach such a magnitude in a single year. Any adjustments to premiums should ideally be gradual, sustainable, and reasonable, reflecting the actual cost pressures without disproportionately burdening policyholders.

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Should Bank Negara reject the proposed 40-70 per cent medical insurance premium hike?

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