16 December 2020
PETALING JAYA: Insurance companies have been urged to stop increasing the premiums of medical insurance.
The Federation of Malaysian Consumer Association (Fomca) said this will impact the affordability of premiums for policyholders.
“Notices are being sent to policy holders at the time when consumers are still struggling to make ends meet which is very unjust and unfair,” its president Datuk Dr Marimuthu Nadason (pix) said in a statement today.
“Fomca advocates for the deferment of repricing rollout by insurance companies which was initially intended to take effect in 2020. However, due to the severe economic disruption caused by the pandemic, the one-year postponement does not provide enough breathing space for policyholders who remain burdened by economic and employment uncertainties.”
Marimuthu said hospital occupancy has decreased tremendously due to the Covid-19, thus insurance companies will have a lesser pay out compared to previous years.
“It was also reported by the Association of Private Hospitals that private hospitals and clinics have seen a drop of almost 70%, thus resulting in a healthier loss/claims ratio as well as improved overall profitability for insurers,” he said.
“Besides that, with many losing jobs and taking pay cuts, it is both an emotional and financial stress for policy holders keep up with the current premiums, what more if the insurance industry goes ahead with the repricing exercise we fear that many policies would be surrendered or lapse due to premium increase.”
He pointed out that during these difficult time many policy holders would have taken loans against the insurance policies and now they are pressured to pay for the loans, premiums and now the premium hike.
“The Policy Loan and Automatic Premium Loan (APL) provided by the insurance company are charged exorbitant interest rate ranging from 7% - 8%,” he said.
“It is clearly unjust since the banks are charging much lower interest rates and the fixed deposit return interest has been slashed down to 2-3%, but insurance companies seemed to exploit policyholders with high policy loan/APL interest rates.”
The Fomca president said the federation foresees a lot of policy holders losing their bonuses they have accumulated to be used to fund their policies via APLs or premium holidays.
“In a more serious note, many will eventually surrender or lapse their policies as the premiums are getting too hush to sustain their policies. It will be not prudent for policy holders to surrender or lapse at the expense of their savings and much needed financial protection especially medical coverage at the time of need.
“Against the backdrop of these unprecedented economic circumstances affecting all Malaysians, the life insurance industry recording is a strong growth in Q3 2020 registering 44% increase in total new business premiums totalling RM2.92B as compared to Q2 2020, on the other hand the timing of repricing will have an adverse effect on the millions of policyholders.
“With the current low occupancy rate at hospitals, insurance companies will not be spending huge sums of money on medical claims as the same scenario will be exhibited next year, hence they should not reprice the medical cards,” he added.
Fomca also suggested that insurance companies re-evaluate the mechanism used to rationalize repricing to avoid the necessity to reprice frequently by adopting, “Average Profitability hitting the threshold” instead of “Profitability hitting the threshold”, with the latter only benefitting the insurance companies.
Secondly, loss/claim ratio should encompass all medical cards as a total portfolio basis instead of per medical card series as reportedly practised currently, it said.
“Fomca strongly suggest that the repricing of the medical cards should be halted for at least the next couple of years and vehemently objects to its roll out,” Marimuthu said.
“Fomca also urges Bank Negara Malaysia (BNM) to intervene immediately by protecting consumers by instructing the insurance companies to halt the premium hike and insist that there should not be any premium repricing for the next few years until we see better economic times.
“Besides that, insurance companies can do their Corporate Social Responsibility (CSR) to all policy holders in being customer-centric rather than profit oriented particularly at this trying times and they have an obligation to assist the policy holders who are facing financial crisis at this critical time.”
Source: https://www.thesundaily.my/home/fomca-stop-increasing-medical-insurance-premiums-DK5628489
