MEDICAL INSURANCE PREMIUM HIKES: WHY IS IT HAPPENING NOW?

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Note: This is based on my general understanding of the current situation occurring to provide readers with a clearer picture on medical insurance premium hikes. Any decision you make for your policy should first be consulted with your agent/financial advisor, and not just based on this article alone. 

In the recent years, medical insurance premiums have increased drastically and affected many Malaysians. It wasn’t just one insurance company doing it, but nearly all. It was also affecting older policies (policies purchased 10 years or more), as well as more recently purchased policies (which is 5 years or more). In this article, I will go through the key reasons on why this has happened and what can be done about it.

KEY REASONS:

Reason 1 – Increase in Medical Claims

How does insurance help individuals in times of need? We know it is based on a pooling of premium by a group of individuals. Whenever a claim is paid, it is taken from this pool of money. When we are healthy, we continue to contribute premiums. When the unfortunate happens, and a claim is to be made, we can be compensated financially. In the event where there is a huge increase in claims occurring at the same time, this would affect the amount of funds available in the pool. So when it drops, everyone will then need to contribute more to keep the pool running.

Reason 2 – Private Hospital increasing their rates/fees

Your insurer may have sent you a letter or communicated via your agent/advisor on the top up amount required to sustain your policy. If it is beyond your budget, then you may discuss with your agent/advisor on an amount that you are comfortable with. This will help cushion the premium increase.

3) Ignore and continue paying the same premium as usual

Finally, you have an option to ignore and not do any top up. As long as your fund value is enough, then your policy will continue, even after the cost has increased (the only effect would be lesser fund value). A common question I get is "How long can my fund value continue to cover the increasing cost?" That will solely depend on the age of the policy holder, as the cost tends to be lower if you are much younger. However, an estimate timeframe can be given by your agent/advisor based on the insurer's policy sustainability projection.

Therefore, the younger a person is, the longer the policy can maintain based on the current premium. The older the person, the higher the cost of insurance, and therefore, the policy may maintain for a shorter period of time.

QUESTION: “SHOULD I CONTINUE PAYING OR GIVE UP THE POLICY?”

Some clients have told me that they rather give up the medical policy than to pay these high premiums. While I understand that it is indeed a shock as the increase can be between 50-100% of the original premium, we need to focus on the reason of why one would decide to have medical insurance. It is having the option of immediate treatment at private healthcare. When I mention this, some clients have also replied that they rather go to government hospital if there is any serious issue. I do agree that government hospitals have one of the most advance treatments and technology. However, it is the issue of TIME.


From my personal experience, I had a family member who preferred going to government for an urgent surgery because he didn't want to burden the family with the expensive cost of private healthcare. When he checked on the wait time of the urgent surgery at the government hospital, it ran into a few months!! Why is this so? It isn't because the government healthcare is inefficient, but in fact, it is because TOO MANY people are going to government hospital because they can't afford private healthcare. Who are these individuals waiting at the government hospital? It is mainly B40 income group who don't have a choice and don't have the financial ability to get even basic medical insurance.


Back to my family member who required urgent surgery, he ended up going to a private hospital and the cost of the treatment still fell back on my family members, who had to pool their personal money and pay for it. Letting go of your medical policy, means that your children or spouse becomes your insurer. It also means fighting in queue with the B40 income group who may also require urgent medical attention at government facilities. Remember to think through carefully before making a decision to stop.



CONCLUSION

While medical premium hikes are unavoidable, there are definitely some key steps that I would be able to advice you on getting prepared for this. For those who are below 50, the key idea is to have proper “medical retirement fund” planning. For those who are retired, the key idea is to allocate a separate fund from your retirement pool to grow it further to ease the burden on medical premiums, especially in the future. This would best be discuss with your financial advisor, and as always I am here to help as well. 

Get a quote via Whatapps or call: 012-6160412


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