Balancing premiums and protection

Wang: If medical inflation continues at its current pace, the private insurance model will face real sustainability challenges.

AS medical insurance policyholders grapple with premium increases, one insurer appears to have recorded stronger profitability in recent years.

Allianz Malaysia Bhd’s life insurance business recorded a profit before tax (PBT) of RM544.8mil for the financial year ended Dec 31, 2025 (FY25), up 13% from RM482mil a year earlier. Its insurance revenue rose at a slower pace of 9.2% to RM2.66bil.

Based on these figures, the life insurance segment’s pretax profit margin increased to about 20.5% in FY25, from 19.8% in FY24 and 19% in FY23.

However, this does not necessarily mean Allianz Malaysia’s medical insurance portfolio is enjoying a similar level of profitability, as its life segment also includes investment-linked protection, employee benefits, savings and other products.

Earnings are also affected by investment results and contractual service margin releases.

Allianz Malaysia, which is 62.61% owned by Allianz SE, does not disclose the profitability of its medical insurance portfolio separately.

Still, the improvement raises a fair question at a time when policyholders have had to absorb substantial repricing: Are premium increases merely sustaining the insurance pool, or are they also helping insurers preserve or improve earnings?

Allianz Malaysia chief executive officer Sean Wang rejects the suggestion that insurers are protecting margins at their customers’ expense.

“Our goal isn’t to protect margins at the expense of our customers, but to ensure the sustainability of the insurance pool for everyone. Rising claims and medical inflation have forced us to adjust premiums, but we’re also working hard to keep coverage affordable,” he tells StarBiz 7.

“Ultimately, we want to be transparent about why premiums change and work together with customers to find solutions that balance affordability and access. We’re committed to fairness and open communication, and we welcome feedback from our policyholders,” he adds.

According to figures cited by the insurer from the World Bank, medical claims inflation averaged 21.6% annually between 2022 and 2024, outpacing premium inflation of 13.2%.

The company attributes this to ageing populations, longer life expectancy, chronic illnesses, wider health screenings, and advances in medical treatments and medicines.

“The reality is that medical inflation has become a global challenge, consistently outpacing general inflation across most healthcare systems worldwide,” Wang says.

Yet Allianz Malaysia argues that rising treatment costs are not the main reason medical insurance costs have escalated.

“Increased utilisation of healthcare services is the main driver of medical claims inflation. 70% of the growth in medical insurance costs in Malaysia comes from more frequent use of healthcare services, not just higher prices,” Wang says.

Claims frequency increased by 38% between 2022 and 2024, while the number of claims per 100 policyholders more than doubled from 11 in 2018 to 25 in 2023, according to the figures cited by the company.

More policyholders are claiming not only for serious conditions such as cancer and heart disease, but also for minor ailments, increasing the overall cost borne by insurers, he says.

“Rising frequency is more structurally concerning. It indicates a shift in consumer behaviour: People are using their insurance more often, not just for major illnesses but for a wider range of treatments, including minor ailments,” Wang says.

Sustained high claims frequency could destabilise the insurance pool and lead to continued premium increases, he highlights. The severity of individual claims is also rising as patients receive increasingly complex and expensive treatments.

Treatment costs account for about 25% of medical claims inflation and are being pushed higher by new technologies, higher hospital charges and complex treatments such as oncology medicines and stem-cell transplants that may cost more than RM300,000 per course, Wang adds.

The insurer also points to hospital pricing strategies, over-investigation and over-treatment as contributing factors.

Charges for hospital supplies and services remain unregulated, he notes.

“Insurance and takaful operators have no reservations about paying for high-cost treatments, as long as the treatment is clinically effective or beneficial for patients, in accordance with best practices and standards of care,” Wang says.

“Problems arise when it comes to the adoption of treatments which are substantially more expensive than the current gold standard but offer no additional benefits,” he adds.

The premium issue, therefore, cannot be resolved by insurers alone. It requires private hospitals, doctors, regulators and insurers to address how treatment is priced, recommended and used, he says.

“If medical inflation continues at its current pace, the private insurance model will face real sustainability challenges,” Wang says.

“Without meaningful intervention, sustained medical inflation will place increasing pressure on healthcare affordability, accessibility and the long-term sustainability of healthcare financing,” he adds.

Allianz Malaysia points out that it supports the government’s Reset strategy and other regulatory initiatives aimed at addressing the underlying causes of healthcare cost escalation.

“Measures that improve transparency, strengthen clinical governance, encourage sustainable healthcare financing and align Malaysia with international best practices are important steps in the right direction,” Wang says.

Co-payment, whereby policyholders bear part of their medical expenses rather than passing the entire bill to the insurer, is one measure supported by Allianz Malaysia.

“The introduction of compulsory co-payment features is aligned with international best practices and represents an important step towards balancing affordability, accessibility and sustainability within the healthcare system,” Wang says.

However, greater cost-sharing could also result in some policyholders postponing necessary treatment.

The effectiveness of co-payment will depend on whether it reduces unnecessary utilisation without making appropriate medical care unaffordable for lower-income policyholders.

Another proposed answer to the affordability problem is MediAsas, the government’s standardised Base Medical and Health Insurance/Takaful plan.

The pilot will run in the Klang Valley from the end of July to October 2026 with six insurers and takaful operators, before a nationwide rollout targeted for January 2027.

Allianz Malaysia, whose life insurance subsidiary is participating in the MediAsas pilot, did not respond to questions pertaining to the new offering.

Despite the recent challenges, the company still counts healthcare as part of its wider growth strategy moving forward.

It plans to expand its life business across protection, health, savings, retirement, legacy planning and employee benefits, while using co-payment and deductible features to balance protection with cost management.