Insurance may soon become a luxury that many can no longer afford.

According to Utusan Malaysia, many policyholders have received letters from insurance companies stating that their medical premiums are expected to increase by 40-70% next year.

Utusan Malaysia said it had attempted to obtain clarification from several insurance companies but received no response.

The main reason for this, according to insurance companies, is medical inflation. In Prudential’s webpage, it stated that the:

• Rise in Non-communicable Diseases (ie. bad lifestyle, unhealthy eating habits)

• Increased Utilization of Health Services (ie. ageing population)

• Medical Advancement (ie. new technologies)

are among the main reasons for rising medical costs.

How are Malaysians reacting?

Many are frustrated with the price increase and directed the blame to the government and insurance providers.

Some policyholders are choosing to terminate their policies entirely, which would lead to more people seeking healthcare at the already overcrowded public hospitals.

“It feels like an annual event.”

A policyholder who asked to be known as Hamidi said that his payments increased by 50% in the past two years, from RM157.69 to RM237.34.

“Whenever we ask for an explanation, the company says it’s due to rising treatment costs.”

“What proof is there that treatment costs increase every year?”

Many netizens related to his statement and said that they’re facing the same issue, with 30-40% increments in the past year (and another hike expected next year).

The price increases are burdening Malaysians.

Our wages have been stagnant for the past decade, but we’re hit with food inflation, housing inflation, and now medical inflation.

Meanwhile… KPJ Healthcare posts record profit..?

You would think that the rising medical costs are straining hospitals and insurance companies. But no. 

On Tuesday, KPJ announced a historic milestone for the quarter ended 30 September, recording its highest-ever quarterly revenue of RM1.03 billion.

The group surpassed RM1 billion in quarterly revenue for the first time, driven by increased patient volumes and expanded bed capacity across its network.

Its earnings came in RM253.7 million, representing a 14% growth y-o-y.

Following this, KPJ has declared a fourth interim dividend for FY2024 of 1.15 sen per share, totaling RM50.2 million.

Prudential’s net profit rose 68% from the year before.

In 2023, Prudential generated RM5.07 billion in insurance revenue.

Its net profit rose to RM963.47 million, representing a 68% increase from RM572.16 million the year before.

In the same year, Prudential paid dividends twice to its shareholders, once in May and once more in September, totaling RM451 million.

This is slightly lesser than 2022’s dividend of RM535 million.

How much did Prudential payout in claims?

Out of all these numbers, RM2.37 billion (or 46.7% of revenue) were used for claims, mainly in:

• Medical: RM1.79 billion

• Critical Illness: RM247 million

• Death: RM289 million

So why are insurance premiums going up if these companies are making a profit?

It’s simple. They’re private companies and they answer to shareholders.

They’re not selling you insurance because it’s a “public service.”

They’re selling it to you for profit.

This is why the government needs to intervene and regulate these companies from increasing their prices unrealistically. If they allow the 40-70% hike to go through next year, then insurance will soon become a luxury that people can no longer afford.

Despite all this, I don’t think insurance is a scam. Here’s why.

i) Insurance companies often have discounts with private hospitals.

Ever wondered why the first question doctors or nurses ask you is if you’re covered? That’s because they want to understand your medical plan and determine the best way to utilize your insurance.

Very often, insurance companies negotiate discounts with private hospitals, which will lower your total bill, especially for critical illnesses.

ii) It’s a form of “forced saving”.

Think of it as mandatorily contributing your monthly savings to a disaster fund which you may never use.

It’s better to have it and not need it, rather than need it and not have it.

What can I do about this?

i) Understand your plans and only buy what’s important to you.

According to RinggitPlus founder Hann Liew, many plans are bundled with investment objectives, which increase your monthly payments.

Without these, you can still get premium coverage at only RM100-150/mo.

ii) Take care of your health.

If you have the time, cook at home more often and try meal prepping to avoid eating out regularly.

Keep your lifestyle active and consume in moderation. Avoid excessive drinking or smoking as you’ll pose a higher risk of developing illnesses such as lung cancer and heart problems.

Insurance companies charge higher premiums to smokers to compensate for the increased likelihood of claims related to these health issues.

What is the government doing about this?

Bank Negara has issued a press statement addressing the price increases for insurance and Takaful.

The report stated that insurance companies are now required to “review their current repricing strategies for more reasonable implementation”.

Additionally, the companies must also ensure that the options are “meaningful” and “support” those affected by the repricing.

Exactly how this will be implemented, we’re not sure.

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That’s all for this week’s newsletter!

Disclaimer: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.