PETALING JAYA: A proposed surge in insurance premiums could severely impact businesses, particularly micro, small and medium-sized enterprises (MSMEs), says the Malaysian Employers Federation (MEF).
Its president Datuk Dr Syed Hussain Syed Husman said any cost increase could greatly strain working capital, hinder cash flows, and discourage crucial investments in digitalisation, tech adoption and operational expansions.
"Such a steep hike in insurance premiums will pose various challenges, especially to MSMEs that typically operate on tight budgets," he said in a statement on Monday (Dec 16).
He said businesses might be compelled to raise the prices of their products and services to manage these higher expenses.
"These price adjustments could erode their competitive edge, as higher prices may drive away customers and reduce market shares," he said, adding that widespread cost pass-through could fuel inflation and decrease consumer purchasing power.
Moreover, Syed Hussain said the rising premiums could force businesses to reconsider the extent of fringe benefits they offer, particularly health insurance and related perks.
"To mitigate increased costs, some employers may reduce their insurance coverage levels, leading to less comprehensive health benefits for employees," he said, highlighting potential implications for employee retention, workforce morale, productivity and competitiveness.
Syed Hussain said MEF is calling on Bank Negara and the government to address the issues related to the proposed increase in insurance premiums, stressing that most MSMEs could not afford such rises.
"MEF is worried that if the steep increase in insurance premiums is not addressed satisfactorily, many employers will have to relook medical benefits insurance coverage to employees."
He called for making medical health insurance more affordable to encourage both individuals and employers to take up such coverage, warning that higher premiums may lead current policyholders to reconsider their policies, with some potentially dropping out due to cost constraints.
He added that MEF supports initiatives such as the 'Rakan KKM' programme and upcoming amendments of the Private Healthcare Facilities and Services Act 1998.
"We applaud Bank Negara's directive for insurance and takaful operators to reevaluate their pricing strategies, stressing the need for a structured approach to moderating premium increases over time," he said.
