KUALA LUMPUR: The Life Insurance Association of Malaysia (LIAM) is working with Bank Negara Malaysia (BNM), the Ministry of Health and the Malaysian Takaful Association (MTA) to develop a basic insurance plan to ease the burden of rising medical costs, particularly for low-income and vulnerable groups.
LIAM chief executive officer Mark O’Dell said the industry is under immense pressure due to post-pandemic claims surges and persistent medical inflation, which he said could reach up to 30%.
“These estimates are based on two key assumptions – that medical inflation does not ease, and the premium cap remains in place for three years,” he said following LIAM and Malaysian Life Reinsurance Group Bhd’s (MLRe) Hari Raya Aidilfitri celebration today.
The cap, introduced by BNM as an interim measure, limits annual increases in premiums and contributions for medical and health insurance or takaful products to below 10% for at least 80% of policyholders until the end of 2026.
O’Dell confirmed that the takaful sector alone is projected to incur potential losses of RM800 million. At the same time, the broader insurance industry could face up to RM4.5 billion in losses due to uncollected contributions under this pricing control.
“In 2023, 25 out of every 100 policyholders were hospitalised, compared to just 10 or 11 per 100 before the pandemic. We saw a spike in hospital admissions post-Covid, which has not returned to pre-pandemic levels. This has driven claims up substantially,” he said.
To address the affordability gap, O’Dell said, the proposed basic insurance plan would offer more accessible coverage options for those struggling with premium hikes. “It is really about affordability. The basic plan is designed as an alternative for those who want to maintain access to healthcare but are challenged by cost.”
O’Dell said the industry also advocates for structural reform in how hospitals charge for services. “Currently, hospitals operate on a fee-for-service model, which can incentivise overcharging.”
He said LIAM is proposing a shift towards Diagnosis-Related Group pricing, a fixed-package approach based on diagnosis complexity and comorbidities. “This would push providers to manage costs more efficiently while still delivering quality care,” he remarked.
O’Dell also called for greater price transparency across the healthcare system.
“We are pushing for more transparency so consumers understand the differences in costs between providers, which can vary widely,” he said.
He noted that sustained collaboration among insurers, takaful operators, regulators and the healthcare sector will be key to finding a long-term, sustainable solution.
LIAM, its member companies and MLRe hosted a Hari Raya Aidilfitri celebration with 120 children, teenagers and caregivers from five charitable homes across the Klang Valley.
As part of LIAM’s long-standing Insurans Hayat Cares initiative, the event saw the contribution of RM25,000 in daily essentials – jointly contributed by LIAM and MLRe – to support the day-to-day needs of the five homes, namely Pusat Jagaan Kash Murni, Taman Keramat, Pertubuhan Kebajikan Mesa Assalam, Puchong, Yayasan Noor Manzil, Puchong, Hichiikok Foundation, Taman Rainbow and Pertubuhan Kebajikan Thangam Illam, Pandan Indah.
