KUALA LUMPUR – The government is considering making it mandatory for insurance companies to disclose the profits and losses of each medical insurance policy to ensure transparency in determining premium increases.
Deputy Finance Minister Lim Hui Ying stated that currently, insurance and takaful operators (ITO) are only required to declare their overall profits and losses in their annual financial statements, in accordance with the Malaysian Financial Reporting Standard 17.
“However, they are not obligated to provide a detailed breakdown of the profits and losses for each medical insurance policy.
“We appreciate this suggestion and will conduct a more in-depth study to assess its feasibility,” she said in the Dewan Rakyat today.
Hui Ying was responding to a question from Teresa Kok (PH-Seputeh), who asked whether the government would require insurance companies to disclose detailed profit and loss figures for each medical insurance policy to ensure transparency in determining reasonable premium hikes.
The Tanjong MP added that Bank Negara Malaysia (BNM) has taken steps to enhance transparency in the medical insurance and health takaful (MHIT) industry, including improving the Product Disclosure Sheet (PDS).
“The improved PDS will be more concise and easier to understand, allowing policyholders to clearly grasp the terms and conditions.
“It will also include the industry’s claims ratio, showing that a significant portion of the premiums paid goes toward claim payments,” she explained.
According to her, the average claims ratio in the industry from 2021 to 2023 was 72 percent, meaning that for every RM1 paid in premiums, 72 sen was allocated for claims.
The remaining portion covers management expenses, including IT infrastructure, policy and claims management systems, agent commissions, and insurance company profits.
Additionally, she emphasized that ITOs must ensure any premium adjustments for MHIT products strike a balance between policyholders’ affordability and product sustainability.
“ITO must objectively monitor claims costs and can only adjust premiums if claim costs increase consistently and exceed a predetermined threshold. They are also prohibited from raising premiums solely to boost profits,” she stressed.
She assured that the government will continue monitoring the insurance industry to safeguard the interests of the people. -MalayaDailyToday
