This is the first of three-parts articles explaining the increase in medical insurance’s premium. This article will explain the reason why there is a need for this repricing. Do take note that as this repricing of premium mainly affects investment-linked medical policies, these articles will only discuss such policies.
Recently, some of you may have been notified by your insurance company about changes to your medical insurance premium. Mainly, a recommendation to increase your premium. It may have come as a shock to many of who have been paying the same premium for many years. Why this sudden change? Can you choose not to increase the premium? How does it affect your policy if you don’t?
Let’s answer all these questions by explaining the why.
What is worse than inflation? Medical inflation.
The key reason for the increase in premium is due to the inflation in medical cost. Medical cost inflation has increased significantly in the past decade. FYI, Malaysia is the only country within the Asia Pacific projected with double-digit medical inflation in 2019. Why did the medical cost inflate so much though? A 2019 report issued by Bank Negara identifies the following few key issues:
Yay, we are living longer!
Back in 1960, the life expectancy of a Malaysian is 59.99 years old. Today, we are expected to live up to 75.83 years old. Naturally, as we live longer, plus easier access to better healthcare, the more we use healthcare services.
Bank Negara highlighted that there may be a possibility where patients with insurance are being charged higher by healthcare providers. Of course, higher medical bills simply mean higher insurance claims.
If you go for a buffet today, it is quite likely that you will eat more than your usual portion. This is recognised as buffet syndrome. We tend to maximize the value that you get from the price you paid. Eating three platefuls of fried rice is gonna cost you the same as a single plate, so why not? The same thing happens here when it comes to medical claim. It is always tempting for policyholders to maximise their medical insurance since the insurance premium is paid.
Increase use of hospital supplies and services
Also in the report, Bank Negara notices that the use of hospital supplies and services such as imaging, nursing and medical equipment takes up more than 50% of a typical hospitalisation bill. This can be attributed to better diagnostic tools and more advanced treatment being offered by the hospitals in Malaysia.
Next article, I will be discussing how the increase in medical cost leads to an increase in your medical insurance premium.