Kuala Lumpur, June 18

Life insurance firms are reporting significant losses in their health insurance segments, which have outstripped premiums over the past several years, despite the industry as a whole seeing profits.

From 2022 to 2024, these losses in health insurance portfolios have become increasingly pronounced.

Mark Odell, the CEO of Malaysia’s Life Insurance Association (LIAM), pointed out that a primary factor in this issue is the surge in medical claims following Covid-19, particularly due to a rise in hospitalizations rather than the costs of care itself.

Industry data indicated that claims increased by 73% between 2022 and 2024, contrasted with a mere 21% rise in premiums. This gap has created “a lot of pressure” on insurers.

Many, including lawmakers, have questioned the necessity of raising fees when insurance companies appear to be making substantial profits. Odell explained that insurers maintain various funds, such as investment lien funds and life funds, which they must keep sustainable.

While some Malaysian insurance companies boast a century-long history and are generating profits, Odell noted that the medical side is causing significant losses, which isn’t sustainable long-term.

Odell labeled the interim measures from Bank Negara Malaysia (BNM) as “not sustainable” and emphasized the need for the industry to find solutions in the coming years.

He mentioned that long-term reforms are being explored, including co-payments, the promotion of generic drugs, and increased transparency in average costs for standard procedures.

Co-payments for policyholders, he argued, are essential to mitigate excessive spending and consumption.

BNM has implemented emergency measures that cap premium increases based on the total level of increase: if it’s below 20%, it is spread over three years, while increases between 20-40% can be extended over five years. Anything beyond that requires specific approval.

According to internal data from LIAM, medical billing has risen on average by 14.34% annually over the past seven years, a figure that does not account for inflation. After the pandemic, claims have surged even more dramatically.

Odell reflected that prior to Covid, there were already growing concerns over medical claims. In 2020, there was a decline of 8% as people avoided hospitals but starting in 2021, numbers stabilized, only to shoot up by 33.7% in 2022.

He noted that the rise in medical costs was more about the volume of claims rather than the median cost of care.

However, he reported some promising first-quarter figures showing a steady decline in claims, expressing hope for further normalization in billing patterns.

Odell also raised concerns about a significant number of hospital admissions—accounting for 35% of all admissions from 2018 to 2024—which he suggested may not have been necessary.

He mentioned that many claims from patients who’ve been admitted for observation might not get covered, as insurance plans often do not approve such cases.

Recognizing faults in the design of insurance plans that encourage overuse of healthcare services, Odell, who has led AIA and Manulife, acknowledged the mistakes made in promoting richer plans over the years.

He encouraged a shift towards responsibility, admitting that communication regarding premium hikes needs improvement to gain public trust.

LIAM is collaborating with BNM and the Ministry of Health (MOH) to develop basic health insurance options for those seeking affordable coverage.

This approach mirrors initiatives in places like Hong Kong and Singapore to ensure accessible private care, providing a choice for more comprehensive plans.

Additionally, the association endorses pricing for Diagnostics Related Groups (DRGs), which will initially be used in the government’s pilot program and is expected to expand later this year.