KUALA LUMPUR – Former International Association of Consumer Law president emeritus professor Datuk Sothi Rachagan has urged regulators to demand greater transparency and accountability from insurers amid reports that medical insurance premiums have spiked by 40%–70%.
While welcoming Bank Negara Malaysia’s (BNM) interim measures to address the issue, Sothi argued that they lack provisions to hold insurers accountable for the justification of their pricing. He stressed the importance of making key performance metrics publicly available, including claims ratios, loss ratios, claims settlement rates, and complaints data.
“Publishing such data is essential for consumers to make informed decisions and for regulators to ensure fair practices,” he told Scoop.
“Historically, Malaysia’s Director General of Insurance included such data in annual reports, but this practice has been discontinued.”
He noted data from Statista suggests that insurers maintain healthy claims ratios, with 65.9% of premiums paid out in claims in 2023.
Sothi believes this indicates room for improved claims settlement practices, rather than passing cost increases directly to policyholders.
PAC inquiry into rising costs
Sothi highlighted these points during a public hearing organised by the Public Accounts Committee (PAC), which has launched launched a formal inquiry into soaring health insurance premiums and rising private hospital charges, amid growing concerns that the trend is pushing more Malaysians towards overstretched public healthcare facilities.
In a statement today, the PAC expressed gratitude to the public for participating in the public hearings held under the purview of the Finance Ministry, the Health Ministry, and Bank Negara Malaysia, which took place in Penang and Kuala Lumpur on February 14 and today, respectively.
A total of 730 individuals attended the two sessions, with the Kuala Lumpur session alone, held at the Parliament Malaysia Banquet Hall today, drawing 550 participants.
During the public hearing today at Parliament, PAC members present included Sim Tze Tzin as the moderator, alongside federal lawmakers Teresa Kok, Datuk Wira Ku Abdul Rahman Ku Ismail, Azli Yusof, Dr Halimah Ali, and Dr Richard Rapu.
“For the first time in its history, the PAC decided to hold public hearings to gather direct feedback from citizens affected by the unchecked rise in private hospital costs and insurance premiums,” it said.
“The escalating costs have placed additional strain on the public healthcare system, as more individuals forgo private healthcare and cancel their medical insurance due to rising premiums.”
Following these hearings, the PAC will commence proceedings on the matter on February 24, 2025. The inquiry will involve stakeholders from the health insurance industry, private hospitals, the Ministry of Finance, the Ministry of Health, Bank Negara Malaysia, non-governmental organisations (NGOs), and academics.
A total of 10 proceedings have been scheduled, all of which will be conducted behind closed doors until the process is completed and the findings are presented in Parliament. Testimonies obtained from the public hearings will be included in the PAC report to be tabled in the Dewan Rakyat.
The committee will now move forward with 10 closed-door proceedings beginning February 24, calling representatives from key stakeholders, including the Ministry of Finance, the Ministry of Health, Bank Negara Malaysia (BNM), insurers, private hospitals, non-governmental organisations (NGOs), and academic experts.
Regulatory reforms needed to prevent unfair practices
Sothi also called for stricter regulatory interventions to curb potential industry abuses. He pointed to international precedents, such as the U.S. Affordable Care Act, which enforces public justifications for premium hikes, and mandates that insurers spend at least 80% of premiums on healthcare costs rather than administrative expenses and profits.
Additionally, he warned that some insurers engage in a practice known as ‘cannibalisation,’ where existing risk pools are split to create new pools for lower-risk customers, leaving the remaining policyholders facing disproportionate premium hikes.
“Expanding risk pools equitably is essential to maintaining fairness and preventing premium hikes from being imposed unfairly on existing policyholders,” he said.
Addressing the impact on public healthcare
Earlier, PAC members expressed concern that rising insurance costs are forcing more Malaysians to drop their private medical coverage, leading to increased patient loads at government hospitals and clinics.
Bayan Baru MP Sim Tze Tzin noted that about 70% of private hospital charges remain unregulated, with medications often costing double the price they would at a pharmacy.
PAC’s hearings are also drawing insights from healthcare NGOs, including the Federation of Malaysian Consumer Associations, the Malaysian Medical Association, and the National Cancer Society of Malaysia.
The committee’s final report, incorporating feedback from the hearings and closed-door proceedings, will be tabled in Parliament upon completion of the inquiry. – February 21, 2025