The Life Insurance Association of Malaysia (LIAM), the Malaysian Takaful Association (MTA), and Persatuan Insurans Am Malaysia (PIAM) have outlined a series of recommendations to mitigate rising healthcare costs following the public outcry caused by a proposed 40% to 70% insurance premium increase by 2025.
The proposals were presented during a meeting with the Public Accounts Committee (PAC) in Parliament on 26 February 2025.
During the event, the discussions highlighted sustainable healthcare financing and cost-containment measures, with the industry supporting a “whole-of-nation” approach to address medical inflation. In the short term, insurers and takaful operators (ITOs) have implemented interim relief measures. These include phasing premium and contribution increases over three years (until 2026), capping annual hikes below 10% for most policyholders, and introducing a one-year premium freeze for those aged 60 and above on minimum medical and health insurance and takaful (MHIT) plans. Policyholders whose coverage lapsed in 2024 due to repricing can also reinstate policies without new underwriting.
Several key recommendations have been proposed to support affordability and transparency in Malaysia’s healthcare and insurance system.
These include the introduction of Diagnostic-Related Grouping (DRG) pricing, aimed at standardising healthcare billing to improve transparency and align costs among healthcare providers, insurers and third-party administrators.
Another recommendation is the development of sustainable insurance and takaful products, through collaboration with Bank Negara Malaysia (BNM), to create a basic, long-term product with optional top-up schemes for wider cover.
Greater transparency in medical costs has also been suggested, by publishing average costs of common treatments across private hospitals and annual medical inflation rates to help consumers make informed decisions.
The regulation of pharmaceutical costs, through cooperation with the Ministry of Health (MOH), has also been proposed, including promoting generic drugs and controlling medication pricing, given the high share of private hospital revenue coming from pharmaceuticals.
Additionally, the introduction of co-payment mechanisms for Medical and Health Insurance/Takaful (MHIT) products has been recommended to encourage policyholders to share healthcare costs and manage expenses responsibly.
Other recommendations include cost control measures in private hospitals, such as freezing hospital cost rises during periods when insurers must limit premium increases; removing the 8% Sales and Services Tax (SST) on group insurance; commissioning an independent study to analyse claims inflation and suggest cost-control methods; and offering health incentives such as no-claim bonuses.
The industry continues to advocate for collaborative efforts among insurers, regulators, healthcare providers, and policymakers to ensure the sustainability of Malaysia’s healthcare and insurance system.
These recommendations come as medical inflation has caused rising healthcare costs in the country. Back in 2023, Malaysia saw 12.6% in medical inflation, which is over twice as high as the global average of 5.6%. This led insurers and takaful operators to seek an increase in policy premiums, which, other than public criticism, prompted government investigations and action.
