Navigating healthcare challenges


While rapid improvements in medical technologies, treatments and drugs are essential, they often equate to higher costs.

ACCORDING to the Aon Global Medical Trend Rates Report 2023, yearly medical costs are rising by 14.2% on average.

The surge in healthcare costs is influenced by various factors, including the introduction of new medical technologies, an ageing population requiring more care, the increasing expense of healthcare plans, a growing number of individuals facing long-term illnesses, and changes in lifestyle contributing to a heightened demand for healthcare.

While rapid improvements in medical technologies, treatments and drugs are essential, they often equate to higher costs.

Additionally, with a growing ageing population, there is a heightened demand for healthcare, particularly in managing lasting health issues, as chronic diseases such as diabetes, heart conditions and obesity are on the rise – necessitating continuous care and treatment.

The rise in healthcare costs is also tied to the upkeep and growth of healthcare facilities, and the need to pay more for skilled medical professionals who can manage new technologies for medical services and treatments.

The high cost of prescription medicines and the creation of new drugs also add to the financial burdens in healthcare, while administrative costs of running healthcare services, such as handling bills and insurance claims, also contribute to the overall increase in healthcare costs.

These factors push takaful operators and insurers to adapt to these new challenges, as Takaful gains popularity as a robust solution for coping with increasing medical costs.

“Medical inflation is a complex issue influenced by various economic, technological and social factors. Like all insurers, takaful operators have to continually adapt to this shift,” says Malaysian Takaful Association chief executive officer Mohd Radzuan Mohamed.

Sudden events, such as pandemics, can put extra pressure on the healthcare system, leading to increased spending.

Moreover, the complexity of healthcare costs is magnified by government policies, reimbursement mechanisms and the competitive nature of the market.

Global healthcare costs also create challenges for both insurers and takaful operators, as they need to find the right balance between offering complete coverage and staying financially viable.

“Policy adjustments, regulatory compliance and market trends are key factors that takaful operators need to navigate skillfully. Doing so enables us to offer financial solutions that are both fair and comprehensive,” adds Mohd Radzuan.

“Factors like risk pooling, medical inflation and market dynamics contribute to fluctuations in contributions across various medical plans.”

“Takaful must balance affordability with thorough coverage to stay effective and sustainable, especially as healthcare keeps changing,” says Malaysian Takaful Association chief executive officer Mohd Radzuan Mohamed.

Mohd Radzuan shares that tabarru principles are also at the heart of takaful, where participants contribute to a mutual fund designed to support fellow members in times of need.

“Tabarru is not just a principle but the spirit of takaful – encapsulating cooperation, mutual assistance and social responsibility,” he says.

“This ensures takaful complies with Islamic principles that align with Islamic finance, particularly in avoiding interest (riba), uncertainty (gharar) and gambling (maisir).

“A key demonstration of this is when members contribute to the takaful fund without filing a claim; their payment is not merely a financial transaction but transforms into an act of sadaqah or charitable giving.

“In this way, every member's contribution strengthens the communal fabric, ensuring that the principles of mutual aid and solidarity are actively practiced, keeping true to the essence of takaful.”

Maintaining reliable and long-lasting services in takaful and insurance depends on being flexible, managing risks well and always aiming to meet ever-changing customer needs.

This means that takaful operators and insurers need to stay alert to shifts in the market, as well as to new rules and possible new risks.

This can be done by using modern data analysis tools and new technologies to help them understand and handle risks more effectively.

“In an evolving medical landscape, leveraging technological advancement is essential for precise risk assessment and policy formulation in takaful.

“Takaful must balance affordability with thorough coverage to stay effective and sustainable, especially as healthcare keeps changing.

“Insurers and takaful operators should also work on preventive health, finding ways to keep costs down, and coming up with new and creative products.

“Doing these things makes what they offer more valuable to customers, building trust and satisfaction over time,” adds Mohd Radzuan.

Takaful companies will also need to stay relevant in a fast-moving market by keeping an eye on market trends, customer preferences and their competitors, to utilise these insights to refine their products and services.

By sticking to these strategies, takaful operators maintain the strength and trustworthiness of their funds, ensuring they can keep providing services and show their commitment to the communities they serve.

“Being sustainable and ethical is fundamental in takaful, and it is really important for long-term success in the field,” Mohd Radzuan shares.

As Malaysia's healthcare landscape rapidly changes, takaful is becoming increasingly crucial as it provides more than just financial protection, by embodying ethical principles and cooperative financial principles.

These principles, effective in managing the complexities of medical inflation, contribute to Takaful's success in navigating healthcare challenges.

As a result, takaful stands out as a symbol of ethical and sustainable financial solutions, guiding Malaysia towards a more secure and prosperous healthcare future.

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