Insurance up, again

Even as the Health Ministry and Bank Negara race towards slashing medical and insurance costs through various measures, Malaysians have to contend with another round of price hikes.

BARELY two years since the last price hike, policyholders are again forced to pay more for medical coverage as insurers battle with inflation.

A check with agents from several companies reveals that at least five insurers have either increased their charges and premiums or repriced their medical card, by up to a whopping 30% since early this year.

More are expected to follow suit, agents believe.

“My company planned to do it in July but it’s been deferred to next year. The hike is expected to be an average of RM15 per month for medical insurance. Another company was supposed to increase this year but after talking to their agents, decided to put it on hold,” a senior agent who only wants to be known as Rajini, shares.

One company implemented the higher rates of between 10% and 15% in January while another two repriced their medical cards by up to 30% recently, he adds.

In 2014, Sunday Star exclusively reported that faced with higher claims from rising medical costs, many insurance companies increased their charges and premiums by up to 20%.

Another senior agent who declined to be named says his company has been sending out letters to notify policyholders of a 10% to 30% hike since October.

Both agents have been in the industry for some 30 years.

Venting on Facebook with a row of angry emoji, one policyholder says his yearly premiums will increase by more than RM300 next year. He says the insurer sent a letter notifying him of the hike due to higher medical costs.

On Friday, a Petaling Jaya reader wrote to The Star saying that his insurer was raising his annual medical insurance premium by RM300. Policyholders shouldn’t have to pay a higher premium because insurers would have factored in inflation when coming up with the yearly premium table, he opined. And, as coverage is capped, any hike in medical costs just means that the policyholder will reach the cap faster. The perception that medical costs have increased, he felt, could be due to some medical practitioners who inflate the costs for insured patients.

The National Association of Malaysian Life Insurance and Family Takaful Advisors (Namlifa) objects to the increase.

Its president James Bong insists that any increase must be justified, pointing out that a rise in premiums cannot be at the insurers’ whims and fancies. Inflation is always blamed but where is the justification, he asks.

“How much claims have been paid out? What was the total premium received? We don’t know.”

He also questions whether the mortality table used to calculate premiums was updated.

“You cannot use a mortality table from the 1970s to calculate today’s premiums. Our life expectancy is much longer now so premiums should be lower,” he adds.

A premium hike, he says, would hinder Bank Negara’s goal in achieving a 75% insurance penetration rate by Year 2020, forcing the Government to build more hospitals.

Life insurance, Rajini explains, has two main components – basic, which covers death and disability, and riders. Everything that’s covered has its own premium. Medical usually costs the most, he observes.

So, even if the medical rider that’s attached to insurance plans are not making money, the basic coverage and other riders like accident, premium waiver and critical illness, are still raking in profits.

“Every time there’s a reprice, the profit margin gets higher. They’re still making a profit despite rising healthcare costs and having to make higher claim payouts. It’s just that they’re earning less.

“Previously, my company only increased premiums and charges for new medical cards but since 2014, even existing policyholders were affected.”

In May, his company’s agent association appealed to Bank Negara to re-consider allowing an increase in premium and charges as it would have a negative impact on the central bank’s penetration drive.

Insurers, thinks Namlifa’s immediate past president Victor Kho, are taking the easy way out by blaming high hospital charges and making policyholders the scapegoat.

The Government must be the guardian of consumers or risk losing the public’s trust. Unless the reasons behind the hike are explained clearly with statistics, it shouldn’t be allowed, he says.

“Every other year, premiums increase. How are policyholders to survive? If the numbers prove that a hike is necessary, okay. But the quantum must be reasonable and policyholders who haven’t made claims must get some benefit back. It’s unfair to make good customers support the bad ones.”

Bong agrees. Insurers must reward healthy policyholders. For instance, those who lead healthy lifestyles, should get a higher sum assured, he suggests.

The Goods and Services Tax (GST), Rajini laments, isn’t helping.

When a policy is repriced, the GST charged also rises. And, when hospitals charge insurance companies GST, the inflated charges are passed on to consumers.

He says many policyholders, have had their policy lapse in the last two years because of non-payment compared to previous years because of the GST, higher living costs, and pricier premiums.

“Yes, policyholders get some extra benefit for upgrading to the new, pricier medical cards, but if they cannot afford the hike, the policy lapses. And, existing policyholders who aren’t eligible for the upgrade will have to buy a new, more expensive policy.”

Life insurance must guarantee coverage and some savings but that isn’t so for some products, he sighs.

Namlifa, Bong assures, will continue engaging with the Finance Ministry to exempt “necessity policies” covering hospitalisation and critical illnesses, from the GST because if people opt out of getting insurance or if their policies lapsed because they could not afford to continue paying their premiums, it will burden government coffers.

In March last year, Sunday Star reported that policyholders must pay at least 6% more for medical and health-related insurance coverage although life insurance is exempted from the GST. The GST impacts all traditional and investment-linked policies with medical, critical illness or personal accident benefits attached. For traditional policies, the GST is imposed on the premium. For investment-linked policies, it’s charged on the insurance charges.

Bong hopes the Government will allow tax relief claims of RM6,000 for life insurance, RM3,000 for medical insurance and RM3,000 for education insurance.

Tax relief for Employees Provident Fund (EPF) contribution and life insurance is currently limited to RM6,000. And, tax relief for medical and education insurance is capped at RM3,000.

“Each insurance product should have a separate tax relief category and not be lumped together. Tax relief will encourage more people to get insurance, in line with Bank Negara’s aim.”

It’s up to the Government to control private healthcare costs, Federation of Malaysian Consumers Association secretary general Datuk Paul Selvaraj opines.

Healthcare isn’t a commodity and shouldn’t be priced as such. It’s a basic human right, he insists.

Insurance rates will only go down if medical costs in private hospitals are contained, he opines.

“In many countries, public and private healthcare are integrated so the difference in costs for basic medical services is small,” he says.

Malaysia, Health director-general Datuk Dr Noor Hisham Abdullah recently announced plans to further achieve universal health coverage (UHC) through public and private partnerships. Growing population needs such as the increasing number of non-communicable diseases and the ageing population, are taking a toll on the system, Sunday Star reported on Nov 20.

Dr Noor Hisham had said that the Government would come up with a voluntary private insurance scheme, with the price being negotiated by the Government for better healthcare access to the private sector.

With financing from the scheme, private hospitals could continue expanding in urban areas and rural areas so the Ministry need not invest in hospitals.

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