30th November 2021 - 2 min read
The chief executive officer of Life Insurance Association of Malaysia (LIAM), Mark O’Dell has called upon all stakeholders to work with the insurance and takaful industry to address the problem of rising medical cost and premium inflation. These include entities such as Bank Negara Malaysia, private hospitals, and doctors.
O’Dell explains that their cooperation is necessary as medical costs at private hospitals in Malaysia have been surging in tandem with the premiums of private medical insurance, and he attributed it to several factors.
“The major drivers of medical and premium/contribution inflation are advances in medical treatment, imported equipment, supplies and medicine, high prevalence of non-communicable diseases, an ageing population, and increasing benefits and policy design,” O’Dell commented, adding that this inflation is a global issue, with the global annual inflation rate currently reported at 8%. This is almost on par with Malaysia’s rate of between 10% to 15%.
On top of that, O’Dell also shared that insurance claims have actually been increasing at a faster rate than premiums in recent years. “Over the long term, this threatens the sustainability of private medical insurance. For LIAM members, from 2017 to 2019, expenses and operational costs fell to 9.1% of premiums/contributions, while claims rose to 88.6% of premiums,” he stated.
Meanwhile, the average annualised premium increase for all medical and health insurance policies between 2017 to 2021 was found to have settled at 6.47%, with the rate revision happening only once every three to five years.
O’Dell further drew data from a separate 2020 study, which also highlighted that the average increase in the actual cost of claims is higher than the premium increase. To illustrate, the average cost of covered hospitalisation rose at an average of 9.3% for non-surgical treatments, and 7.8% for surgical treatments between 2013 to 2018, out of four million claims made.
In resolving the existing problem, O’Dell said that stakeholders need to provide greater transparency by publishing the average cost of common procedures and treatment, which will then enable policyholders to make better healthcare decisions. “We also suggest to automate and digitise guarantee letter processes to reduce admin costs and improve the insured patient experience,” he said.
(Source: The Edge Markets)
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