When protection turns into burden: Policyholders cancelling health insurance plans as premiums spike

A health expert has warned that the looming increase in monthly premiums for insurance and takaful could exacerbate the situation at government clinics and hospitals as more contributors cancel their medical insurance in the face of financial constraints.

Dr Zainal Ariffin Omar said the number included those who had decided to purchase a medical insurance plan but changed their minds after news of the increase next year.

"Many will turn to government health facilities," Zainal, who is the health ministry's former disease control deputy director, told MalaysiaNow.

"The burden on the staff will increase, and this will jeopardise the quality of health services."

He added that personnel such as doctors and nurses would come under additional stress, on the back of the government's announcement that nurses at health ministry facilities would need to work 45 hours a week compared to the previous 42.

The Life Insurance Association of Malaysia (LIAM), the Malaysian Takaful Association, and the General Insurance Association of Malaysia had said that insurance premiums were expected to increase by 40% to 70% next year.  

They attributed the rise to the cumulative medical claims costs inflation, compounded by an increase in the cost of healthcare.

In response, central bank Bank Negara Malaysia instructed takaful and insurance operators to review their repricing strategies.

Zainal said the government should find an immediate and effective solution to the increase in premiums.

"Otherwise, healthcare services will deteriorate and collapse," he added.

"The victims will be the people."

Malaysia's healthcare services are provided nearly free of charge, thanks to the billions in subsidies given each year. This means that the majority of citizens rely on the public healthcare system in order to get treatment and medication.

However, it also means that hospitals and clinics are bogged down, with long waiting times due to congestion at public health facilities.

MalaysiaNow understands that takaful policies will be more affected by the increase in premiums than conventional insurance.

"Conventional insurance invests the premiums," a senior agent at a well-known insurance company told MalaysiaNow.

"It follows the concept of risk transfer. If there is a profit on the investment, the client will profit. If the investment makes a loss, the insurance company does as well."

Takaful, on the other hand, is based on a mutual fund with all parties affected by either profit or loss.

"It's a shared risk," the agent added. "As medical costs increase, contributions need to increase as well, to ensure that the money in the mutual fund does not decline."

Another agent who asked to be known as Bob said that some 5% of his 1,000-plus clients had decided to cancel their policies after the announcement.

"Most of them are from the M40 group, who have medical benefits from their companies, or civil servants who receive government hospital benefits," he added.

Bob, who has worked as an insurance agent for six years, said most of the clients who cancelled their policies had paid between RM170 and RM250 a month.

Even though the increase in premium is due only next year, information on the rise in cost had been given out in October, he said.

"Most of them had cancelled their policies by December," he added.

LIAM president Loh Guat Lan however noted no similar increase in cancellations.

"We do have the option of offering policyholders a smaller plan, or a deductible plan, to make things more affordable so they can keep their medical coverage," he said.

However, he said that adjustments in price would be made on an annual basis and continue every month for the next 12 months.

When asked whether sales to new clients were expected to fall next year, Loh said sales were linked to economic growth, regardless of increase in price.

"The economic recovery gives a positive perspective for the insurance industry," he said.