Insurance industry defends premium hikes amid soaring medical inflation

 Life Insurance Association of Malaysia CEO Mark O'Dell says medical inflation averaged 16.1% annually between 2021 and 2023.

LIAM CEO Mark O’Dell said the industry’s medical insurance portfolios had been losing money for the past three years as claims costs continued to rise. (LIAM pic)

PETALING JAYA:

Medical inflation averaging 16.1% a year is “scary”, says Life Insurance Association of Malaysia (LIAM) CEO Mark O’Dell, who told the Public Accounts Committee that rising healthcare costs were putting increasing pressure on insurers and policyholders alike.

Appearing before the PAC during its inquiry last year into rising health insurance premiums and private hospital charges, O’Dell said industry estimates showed medical inflation averaged 16.1% between 2021 and 2023.

He said the industry’s medical insurance portfolios had been losing money for the past three years as claims costs continued to rise.

He also rejected suggestions that insurance companies were retaining excessive profits, saying almost all premium income collected was paid out in claims.

“When they say claims are at 92.96%, it simply means that for every dollar and ringgit, 92.96% is used to pay claims,” he said.

O’Dell was one of 21 witnesses who testified before the PAC during 19 proceedings held between Feb 24 and Aug 14, 2025.

The proceedings were documented in a PAC report on rising health insurance premiums, private hospital charges, and their impact on public healthcare, which was tabled in Parliament today.

PAC said its inquiry was prompted by growing public concern over rising healthcare costs and Malaysians’ ability to maintain insurance coverage.

The committee members questioned insurance executives about profitability and remuneration, amid concerns over premium increases faced by policyholders.

O’Dell said profit margins across the industry were generally around 10%.

On remuneration, Prudential Assurance Malaysia Bhd CEO Lim Eng Seong said staff bonuses averaged about three months’ salary.

Asked about senior management bonuses, Lim said they could rise to as much as 10 months’ salary during particularly strong years.

Great Eastern Life Assurance (Malaysia) Bhd CEO Koh Yaw Hui said staff bonuses typically ranged between three and four months’ salary during profitable periods.

O’Dell acknowledged that some insurance products had contributed to rising healthcare costs.

“The two things that really contribute to inflation are the cashless card and ‘100% as charged’,” he said. The latter referring to the insurance option that allows for hospitalisation or day surgery bills to be paid fully by the insurance company.

He said both features were introduced to improve convenience and coverage for insurance holders, but had also reduced cost sensitivity and contributed to higher healthcare spending over time.  - FMT