It’s a commercial move, says LIAM

THE insurance industry had granted a 90-day deferment period or no-lapse guarantee for three months to policyholders impacted by the pandemic this year, according to the Life Insurance Association of Malaysia (LIAM).

During this period, insurance companies continued to provide insurance protection to affected policyholders if they were unable to pay their premiums.

On the repricing, LIAM says they are not in a position to comment as the move is a commercial decision made by the respective insurers and takaful operators.

The National Association of Malaysian Life Insurance and Family Takaful Advisors (Namlifa) meanwhile says it’s wiser to defer the price hike for at least another year.

“Many consumers need time to recover. This move would help alleviate their burden for now, ” says Namlifa president AM Naidu.

At present, he says Malaysia’s insurance penetration rate is low.

“Affordability is a key factor that influences the need to buy insurance.

“When the price hike kicks in, we can expect policies to lapse since many may not have regained financial stability, ” he foresees.

Naidu says medical insurance repricing stems from the high incidence of medical and hospitalisation claims.

“With medical inflation ranging from 12% to 15% a year, ITOs (insurers and takaful operators) will continue to pass the extra costs to policyholders.

“Namlifa hopes the Health Ministry will step in and manage hospitalisation costs, especially inpatient claims, ” Naidu adds.

He says there have been many instances when a policyholder presents a medical card at a private hospital and the bills are generally higher by 20% compared to others who pay on their own.

“Policyholders might not realise the difference as they are not paying, but this will reduce their overall or annual limit on their medical cards.

“The authorities should be more stringent in monitoring payments made through medical cards to ensure policyholders are not overcharged, ” he says.

Former Namlifa secretary-general and insurance practitioner Charles Thena points out that insurers still enjoy profitable business, so they should not pass the medical inflation costs on to policyholders.

It was reported on Dec 1 that the life insurance industry recorded a strong rebound in business in the third quarter of 2020.

New business premiums grew by 44%, or RM2.92bil, compared to RM2.02bil in the second quarter, according to LIAM.

Thena urges insurers to re-evaluate the mechanism used to justify a repricing to avoid increasing prices frequently.

“Most medical cards have high limits, giving a wrong impression that unlimited amounts can be charged without consideration of long-term effects.

“Insurance companies should consider implementing a reasonable deductible to be imposed on all medical plans to deter the overuse of medical cards.

“Psychologically, policyholders will also scrutinise their medical bills, ” he suggests.

Thena says insurance companies should also make it a perquisite for those applying for medical cards to be medically examined to ensure their health status is acceptable for the appropriate pricing.

“The main grouse of policyholders is the timing of the move...

“With these unprecedented circumstances, the timing of the repricing will have an adverse effect on millions of policyholders.

“Bank Negara should take heed of their plight so that they will be treated fairly, ” he says.