Several parties and industry stakeholders have spoken out against insurance companies for increasing insurance premium payments during the present challenging period, saying that the hike has come at the wrong time.
For context, several major insurance companies had announced earlier this year that there will be an “inevitable” hike in medical insurance premiums in 2020. In fact, some have already sent notices to inform their customers of the expected increase in premium prices.
The president of the Malaysian Medical Association (MMA), Datuk Dr M. Subramaniam said that instead of raising premiums, insurance companies should find ways to make medical insurance more affordable. He also said that the increase will affect the B40 and M40 groups the most as they are among those worst affected by Covid-19.
“More than a million people affected by the pandemic in the country have opted to defer their life insurance premium payments for three months this year. The total amount of premium payments being deferred is more than a billion ringgit, according to media reports. This should be enough indication that the people are facing tough financial times,” added Subramaniam.
Subramaniam also urged the insurance industry to explain the rationale behind raising the premiums, questioning if there has been sufficient engagement with stakeholders that included representation for policyholders.
Additionally, Subramaniam noted that the country’s penetration rate of life insurance stood at 54% last year despite having a target of 75%. On top of that, it was also reported that only 10% of the B40 group has life insurance. “How will making insurance less affordable increase the penetration rate?” he questioned.
Similarly, the president of the Federation of Malaysian Consumer Associations (FOMCA), Datuk Dr Marimuthu Nadason also appealed to insurance companies to stop increasing the premiums of medical insurance.
“Notices are being sent to policyholders at a time when consumers are still struggling to make ends meet, which is very unjust and unfair. FOMCA advocates for the deferment of repricing rollout by insurance companies which was initially intended to take effect in 2020. However, due to the severe economic disruption caused by the pandemic, the one-year postponement does not provide enough breathing space for policyholders who remained burdened by economic and employment uncertainties,” said Marimuthu, who had requested for insurance companies to postpone the premium increase back in September.
Marimuthu also pointed out that hospital occupancy has decreased tremendously due to Covid-19, which means that insurance companies will have a lesser pay out compared to previous years. “It was also reported by the Association of Private Hospitals that private hospitals and clinics have seen a drop of almost 70%, thus resulting in a healthier loss/claims ratio as well as improved overall profitability for insurers,” he said. Given such a situation, Marimuthu said that insurance companies should not reprice the medical cards, adding that this scenario will also persist in the following year.
On top of that, Marimuthu said that with many Malaysians having lost their jobs or are required to pay cuts, policyholders are already facing emotional and financial stress to keep up with the current premiums. If the insurance industry decides to go ahead with the scheduled repricing exercise, it may see many policies lapsing or being surrendered.
Meanwhile, the head of corporate affairs of Prudential Assurance Malaysia Bhd, Kho Hui Yi said that healthcare is growing increasingly important in the financial planning of families. “It is our duty to ensure that medical protection for our policyholders will continue to be effective in the long run, amid sustained medical inflation of more than 10% per annum in the past few years,” she said.
Kho also explained that the rise in premiums is attributed to several reasons, including increases in hospital and doctor charges, advancement in medical treatment and drugs, as well as increasing demand for better healthcare services.
“But we understand that Covid-19 has affected our customers. For those whose premium and/or insurance charges are being revised in 2020, we will credit back the incremental portion of the insurance charges deducted for year 2020 to their policy account value. At the same time, Prudential is maintaining its premium for the year 2020 and the new premium (if applicable) comes into effect next year,” Kho further said.