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Excerpt from The Star 14th March 2009

Saturday March 14, 2009

Medical insurance still affordable in Malaysia

By ELAINE ANG

JOSEPH Lee heaved a sigh of relief in between grimaces. His insurance company will cover all the medical expenses he will rack up due to a spinal slipped disc. For the past two weeks, he has been in a private hospital, suffering excruciating pain after various treatments have failed. Now he is scheduled for surgery.

His hospital bill has grown to a few thousand ringgit and there will be even larger charges for his upcoming surgery and post-operative care.

Lee is one of the more fortunate Malaysians who have medical insurance to lean on amid escalating medical and healthcare costs.

These costs have risen by an estimated 30% to 40% over the last three years, mainly due to the increase in the utilisation of medical services and advancements in medical technology.

Prudential Assurance Malaysia Bhd chief marketing officer Thomas Wong sees it as an uphill task to mitigate, let alone bring down, high medical costs, as this will need the collective effort of insurers, healthcare providers and the Government.

“Higher medical claims will definitely affect premiums in the long run because premiums are meant to be able to cover claims, and claims paid are meant to cover inflating medical costs.

“But any premium increase usually comes with an increase in benefits in the medical plan,” he says, adding that Prudential Assurance’s medical claim incidences have increased by around 20% annually for the past three years.

Most insurers, however, feel that medical insurance is still fairly affordable in Malaysia. ING Insurance Bhd president and chief executive officer Datuk Dr Nirmala Menon says this is because a medical insurance package will always offer the option of accessing care at public as well as private hospitals.

“Public hospitals are subsidised by the Government and therefore, medical costs are much lower at these hospitals, which also provide good medical treatment,” she adds.

For example, cash plans (which pays a fixed cash benefit for each day the customer is hospitalised) are typically cheap, ranging from RM40 per annum for RM100 daily cash benefit to RM200 per annum for RM400 daily cash benefit, depending on the age of the customer at the time of purchase.

Reimbursement plans, however, are relatively more expensive and depend on the age of the customer, which room the customer prefers to stay in during hospitalisation and the amount of claims he can make in a year should hospitalisation occur (annual limit).

A reimbursement plan covers the hospitalisation charges, consultation before hospitalisation and post-treatment after hospitalisation and may also include outpatient treatment such as day surgery, cancer treatment and kidney dialysis.

For example, premiums for Prudential’s PRUmajor med 5 can range from about RM505 per year for the cheapest room plan with an annual limit of RM50,000, to about RM5,000 per year for the most expensive room plan with a RM150,000 annual limit.

Great Eastern Life Assurance (M) Bhd’s Great MediCare offers medical coverage at an affordable premium ranging from RM500 to RM800 a year, depending on the age and plan selected.

Executive vice-president and chief marketing officer Loke Kah Meng says depending on the policyholder’s selected plan, medical expenses can be reimbursed in one lump sum up to an annual limit of RM200,000 and a lifetime limit of up to RM1.6mil.

According to General Insurance Association of Malaysia, medical expenses insurance generated close to RM485mil in gross premiums, which represented only about 5% of the general insurance market in 2007.

Executive director Lim Chia Fook says growth in the medical insurance sector has been very encouraging, averaging at least 15% over the last few years with expectations of continued strong growth going forward.

“This is indicative of the greater awareness among individuals, employers and corporations of medical insurance protection as an effective and affordable means of financing these costs,” he says.

Nevertheless, Lim says general insurers in Malaysia expect a difficult 2009 as the global economic slowdown takes its toll on premium growth in this sector, in particular.

“This view is balanced somewhat by the fact that many are now even more aware of the greater need for medical insurance in difficult financial times,” he adds.

Wong is still optimistic about the outlook for the medical insurance sector as only about 40% of the Malaysian population is insured as at 2007.

“The market certainly has plenty of room for growth. There are opportunities for insurance players to continue to introduce new products that not only meet consumers’ protection and savings needs, but are affordable as well,” he says.

To Wong of Prudential, comprehensive healthcare protection should ideally have a hospitalisation and surgical insurance plan, a critical illness plan and a disability income plan designed to cover one’s day-to-day expenses in the event one is unable to work due to an accident or illness.

“More importantly, review your medical insurance plans at least on an annual basis. With healthcare increases continuing to outpace the general inflation rate, chances are the plans that you have bought years ago are unlikely to be enough to meet future needs,” he stresses.