KUALA LUMPUR - The Malaysian insurance industry is poised to enter a new phase of major reforms under government-led RESET initiatives, including the introduction of the medical and health insurance/takaful (MHIT) plan and diagnostic-related group (DRG) pricing to address rising medical costs.
Life Insurance Association of Malaysia (LIAM) chief executive officer Mark O'Dell said industry players are supportive of the MHIT initiative, which is scheduled to come into force in January 2027.
"The industry is very supportive of that because it promises to be more affordable and more sustainable, which will help at least two major population groups.
"One, we hope that it will bring more middle-class people into the private health insurance ecosystem, as well as provide those who are experiencing affordability or sustainability issues an option to look at something adequate but more affordable," he told Bernama.
Meanwhile, commenting on whether the base MHIT plan's annual limit of RM100,000 or RM150,000 is sufficient, he said industry data showed the average claim currently stands at about RM12,000, suggesting the limit would cover the majority of cases.
On current claims trends, he said respiratory illnesses and gastrointestinal conditions remain among the highest in terms of claim volume, noting that these are among the common medical conditions expected to be covered in 99 per cent of treatment cases.
Meanwhile, O'Dell characterised DRG, another major reform coming from the Ministry of Health (MOH), as a 'complex packaged pricing' mechanism that will alter the dynamics between payers and healthcare providers.
He explained that under the framework, hospitals would agree to a fixed payment covering the full course of treatment, rather than billing separately for each service, effectively requiring providers to manage costs more efficiently rather than passing them on under the existing fee-for-service model.
"This is well underway, but it will take time to implement because it is quite a complex job, so you will see it introduced gradually.
"Hopefully next year we might see 20 or 30 per cent of the procedures under DRG, and then you will start to see that they keep increasing year by year," he said.
On the other hand, in response to the proposal for discussions between the Ministry of Finance (MOF) and the Employees Provident Fund (EPF) to potentially allow withdrawals for products under the base MHIT plan, O'Dell opined that this step is a good idea.
"But this will be an individual choice for consumers to make, and it allows them one additional avenue to help fund their MHIT.
"So I think it is a good thing. They have to be able to make their own decisions about how to utilise their EPF," he noted.
On another development, to comply with the new reforms, LIAM has collaborated with the Malaysian Takaful Association (MTA) and the General Insurance Association of Malaysia (PIAM) to introduce the Medical Claims Inflation Report.
He said the report is expected to be released in the coming weeks to clarify the actual medical claims inflation rate and address the many differing figures circulating in the market.
He added that LIAM has also completed a nationwide claims database, another regulatory initiative, which will enable the accurate calculation of the medical claims' inflation rate.
The figure will be published annually for the benefit of policyholders and the general public, he said.
Preparation For MHIT Rollout
O'Dell said that significant work by the working group, comprising Bank Negara Malaysia, MOF, the MOH and industry players, is being actively carried out together with appointed consultants to oversee the implementation of the MHIT plan.
"There is a lot of work to be done, but right now, we are confident that the MHIT plan can be delivered in 2027.
"The heavy lifting is starting right now, with task forces, working groups and other efforts needed to make decisions, draw up guidelines and support the basic MHIT plan," he added.
On prospects, he said Malaysia's insurance industry is expected to remain cautious in 2026 and 2027 as significant changes are set to take place.
He said new customers may adopt a 'wait-and-see' approach with the MHIT's rollout in 2027, while agents will need to adjust from selling MHIT as a rider to offering it as a standalone product.
Despite the upcoming adjustments, O'Dell expressed confidence in the industry's resilience, noting that insurers are generally able to adapt to substantial changes over time. - BERNAMA