More than 340,000 medical insurance and takaful policies were cancelled or surrendered between January 2024 and June 2025, highlighting the growing affordability strain faced by Malaysian households as private healthcare costs continue to rise.

The trend was disclosed in the White Paper on the Medical and Health Insurance and Takaful Basic Plan, which was presented last week.

Rising Premiums Trigger Policy Cancellations

The White Paper shows that the cancellations followed widespread premium revisions by insurance companies and takaful operators to keep pace with higher medical claim costs.

Before interim measures were introduced in 2025, many policyholders experienced premium increases of up to 40%. These revisions came after pricing reviews were postponed during the COVID 19 pandemic and later resumed to reflect actual claims experience.

After accounting for policies that were later reinstated, the 340,000 cancelled or surrendered policies represented 5.2% of all revised policies.

Extent Of Premium Increases

The data highlights the scale of the adjustments faced by consumers.

About 40% of revised policies recorded premium increases of between 11 and 20%. Another 30% saw increases of between 21 and 40%.

At the higher end, 5% of policies experienced increases of between 41 and 60%, while 4% recorded increases of more than 60%. These sharp jumps added further pressure to household finances, particularly for families already managing rising living costs.

Limited Alternatives For Affected Consumers

For many policyholders, cancelling coverage was not a strategic choice but a financial necessity.

The White Paper noted that affected individuals often had limited alternative plans to switch to, making it difficult to maintain private healthcare coverage at a lower cost. As a result, some have had to rely more heavily on the public healthcare system.

This reflects a broader sensitivity to insurance costs among households. Our RinggitPlus Malaysian Financial Literacy Survey 2025 found that around 22% of Malaysians adjusted their insurance coverage in the past year due to affordability pressures.

With few viable private options available, some households have turned to the public healthcare system, adding to ongoing capacity pressures across both public and private healthcare sectors.

Private Insurance Plays A Small Role In Health Spending

The broader context of health financing helps explain the strain on consumers.

In 2024, households funded 39% of total health expenditure directly from their own spending. By comparison, private insurance contributed less than 8%, indicating that many Malaysians continue to pay out of pocket even when insured.

Individual medical insurance and takaful coverage currently reaches about 22% of the population, excluding group policies such as employer provided benefits.

MHIT Basic Plan Introduced To Improve Affordability

In response, the government introduced the MHIT Basic Plan under the RESET Strategy to address structural cost and affordability issues in the private medical insurance market.

The plan is designed for two groups. The first includes individuals who do not yet have medical insurance or takaful coverage. The second includes those seeking more affordable options following recent premium increases.

Coverage Levels And Key Features

Under the MHIT Basic Plan, annual coverage is set at RM100,000. This level is based on recent medical claims data and is expected to be sufficient for 99% of treatment episodes in private hospitals.

For individuals aged over 60, the annual limit automatically increases to RM150,000 to reflect higher healthcare needs later in life.

The White Paper also outlines a Standard Plus option, which offers coverage of up to RM300,000 with a deductible of between RM10,000 and RM15,000. This option is intended for consumers who can manage initial treatment costs but want protection against major medical expenses.

Pricing Stability And Implementation Status

Premiums under the MHIT Basic Plan will be set using actuarial principles and a risk sharing mechanism across participating insurance companies and takaful operators.

The plan is part of a policy framework currently being rolled out, rather than new legislation already gazetted. Further details on implementation timelines and participation requirements are expected as the initiative progresses.

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