PETALING JAYA: Domestic insurance and takaful operators (ITOs) can expect elevated medical claims to remain a near-term headwind, says BIMB Securities Research.
The research house forecasts Malaysia’s medical inflation to reach 16% this year.
“This will continue to pressure medical claims ratios, which are likely to improve only gradually upon full implementation of the diagnosis-related group (DRG) framework,” it said.
The DRG payment system is expected to be implemented alongside the rollout of the basic medical and health insurance and takaful (MHIT) plan in 2027 to manage surging medical inflation and enhance the efficiency of ITO medical claims processing. A pilot rollout of the base MHIT plan is scheduled for the second half of 2026.
“Over time, this initiative is expected to broaden market penetration, particularly among uninsured individuals seeking basic medical coverage.
“It also provides an option for existing policyholders who have been affected by significant premium increases due to rising medical inflation.
“The transition to the DRG framework presents challenges, as it must reconcile the need for ITOs to maintain sustainable margins with profitable insurance and takaful offerings, with the need for private hospitals to preserve healthy profit margins – particularly amid intense competition in major urban centres,” BIMB Securities said.
“For those whose revised premiums have become unaffordable, the new base MHIT plan offers a more affordable alternative, enabling them to switch over to maintain medical insurance coverage,” it said, adding that delays in introducing affordable products could further constrain new family takaful business growth.
The research house has maintained a “neutral” recommendation on ITOs.
It expects general takaful contributions to grow by 10% to 15% this year driven mainly by fire and motor, with family takaful to post mid-single-digit growth.
However, the research house further pointed out that the claims environment remains challenging, with claims likely to stay elevated in the near term, reflecting higher motor bodily injury claims and sustained medical inflation pending full DRG implementation.
