There was public outcry about the substantial increase (ranging from 40% to 70%) in the premiums for private health insurance over the past two years.
According to Bank Negara, more than 340,000 medical insurance and takaful policies were cancelled between January 2024 and June 2025.
In the nationwide debate, the insurance industry, private hospitals and government officials have pointed fingers at each other.
The private hospitals were criticised for overcharging and overtreatment, and the insurance industry for not containing the increase in healthcare costs.
The increased costs were attributed by private hospitals to global medical cost inflation and patients’ worsening health conditions.
The insurance industry, while acknowledging global medical cost inflation, also attributed the increased cost to patients’ “buffet syndrome” – a phenomenon in which the benefits from insurance policies lead patients to seek more expensive and/or additional treatments.
Bank Negara announced its Reset strategy to address increasing healthcare costs and medical inflation in June 2025.
Reset was a collaborative effort between Bank Negara, the finance and health ministries, insurers, hospitals and medical practitioners, among others.
The pillars of Reset were:
- Revamp insurance and takaful products
- Enhance transparency
- Strengthen digital health systems
- Expand affordable care, and
- Transform provider payment systems.
ALSO READ: From vision to action: Reset-ting Malaysia's healthcare system
The World Bank report
The World Bank’s report Cost Drivers in Malaysia’s Medical and Health Insurance/Takaful Sector: A First Look at the Centralized Claims Data Base, published in April (2026), was produced at the request of the government as part of the Reset initiative.
The report was produced with the collaboration of Insurance Services Malaysia, which provided data from their standardised and centralised medical and health insurance/takaful claims database.
It provided an empirical assessment of cost drivers in medical and health insurance/takaful claims from 2022 to 2024.
There was wide media coverage of the World Bank’s key findings, which were:
- Utilisation and spending increased rapidly over the 2022-2024 period.
- Service-level medical inflation is moderate relative to premium and claims inflation, but uneven across settings.
- Cost growth between 2022 and 2024 was largely driven by volume (or utilisation), accounting for two-thirds of the cost growth, while rising prices contributed one fourth.
- Suggestive evidence that factors such as moral hazard (i.e. the tendency for people to take greater risks or act less carefully once they are insured) are contributing to utilisation.
- A large share of inpatient episodes are potentially avoidable.
In 2024, claims inflation reached 21.6%, significantly outpacing premium growth of 13.2%, reflecting the pressure on insurers and the need for reforms to maintain affordability and access.
The World Bank made recommendations for policy consideration and reform directions.
As there has been a strange silence from policymakers, it is reproduced below in toto:
> “Use the centralised claims database as a routine monitoring tool
“Regular reporting of utilisation, unit prices and service mix can strengthen oversight, improve accountability, and enable earlier detection of emerging cost pressures.
> “Enhance price transparency and empower consumers
“Given the large and rising share of HSS [hospital supplies and services] in inpatient bills, policy attention to pricing transparency, billing practices and procurement arrangement could yield meaningful cost containment.
“The upcoming payment mechanism reform (to transition from fee-for-service payments to diagnosis-related groups, or DRGs, based payments) can mitigate some of the current perverse incentives to increase costs per admission.
> “Prioritise reforms that address appropriate utilisation and care pathways, and incentivise outpatient care use
“MHIT [medical and health insurance/takaful] products typically do not cover outpatient visits, including routine preventive visits.
“The observed growth in claims, especially in admissions related to ASCSs [ambulatory care sensitive conditions] and pre- and post-hospitalisation services, could potentially be influenced by incentive-driven behaviours across both patient utilisation and provider service delivery.
“Potential low-value care delivered in complex settings highlights the need for policies defining clinical pathways and stronger claims governance.
“They also warrant insurance product redesign to cover cost-effective preventive and outpatient services and to align cost-sharing to generate appropriate incentives.
> "Advance provider payment reforms to reduce incentives for itemised billing
“A phased move away from fee-for-service, toward DRG-based approaches, can better align incentives, but will require supporting data standards, coding quality, and coordination between regulators, payers and providers.
“The patterns observed also highlight the need to exercise caution during the rollout to ensure that DRG-based payments support efficiency gains without unintended shifts in utilisation patterns.
> “Recognise that MHIT governance is shared and requires coordination across institutions
“Financial regulation and provider regulation jointly shape the incentives and constraints in the private system.
“Effective implementation of the base MHIT plan and DRGs-based payments, requires stewardship and monitoring of insurers and providers alike.”
Need for reformation
That there is a need to reform private health insurance is beyond dispute.
But the talk of such reform really means nothing to the public, especially policyholders, unless there is something tangible, i.e. affordable premiums and increase in premiums (no one expects no increase in premiums!).
The Reset strategy and the Bank Negara report both have to be reviewed.
Both did not address the ill-defined legal pathway for case-based group systems, e.g. DRGs; inadequate Malaysian cost data; ineffective price transparency; the lack of solutions for general practitioners’ (GPs’) issues, especially economic sustainability; absence of national health insurance; progress parameters; governance; and the profit-driven hospitals owned by government-linked companies, which comprise about 80% of private hospital beds.
Even the base MHIT announced by Bank Negara, in January (2026), is unlikely to help as the maximum age for enrolment is 70 years.
Surely someone must have brought up in the discussions that Malaysians’ expected life expectancy is more than 70 years (in fact, it is 75.3 years on average, according to the Statistics Department), and that the maximum healthcare expenditure of almost everyone is in the last year or so of their life.
Would Bank Negara’s base MHIT help those aged more than 70 years if they cannot afford the increased private health insurance premiums, or if those uninsured want to enrol in a MHIT?
The World Bank report provides a roadmap that appears more succinct.
The silence of the parties involved in Reset, and the media to the World Bank report, is deafening.
While reform takes time, there is much that can be done immediately by Bank Negara as the regulator of insurance companies.
The measures requiring full disclosure of health insurance policies to purchasers would include, among others, policies that are in plain language understandable to the man in the street with minimal legalese; specific information of what is covered and what is not; clearer definitions of non-disclosure; and most importantly, simplified mechanisms for rapid resolution of disputes.
Until then, caveat emptor (Latin for “Let the buyer beware”)!
Dr Milton Lum is a past president of the Federation of Private Medical Practitioners Associations and the Malaysian Medical Association. For more information, email starhealth@thestar.com.my. The views expressed do not represent that of organisations that the writer is associated with. The information provided is for educational and communication purposes only, and it should not be construed as personal medical advice. Information published in this article is not intended to replace, supplant or augment a consultation with a health professional regarding the reader’s own medical care. The Star disclaims all responsibility for any losses, damage to property or personal injury suffered directly or indirectly from reliance on such information.
