File photo for illustration purposes.
KUALA LUMPUR: Bank Negara Malaysia (BNM) will come out with a framework as soon as possible to reduce the inflation of medical insurance, which now stands at 12 per cent.
BNM Governor, Datuk Muhammad Ibrahim said the current inflation rate is quite high, thus measures needed to be taken to address the issue.
He said rising medical claims had increased pressure on medical insurance premiums.
“On average, medical insurance claims rise 14 per cent annually,” Muhammad said during the announcement of the country’s second-quarter Gross Domestic Product (GDP) performance here today.
Net claims paid to policyholders had increased to RM4.9 billion in 2016 compared with RM4.5 billion in 2015, of which these claims were driven by demand for better healthcare, ageing population and higher prevalence of chronic and lifestyle diseases.
He also said the increase in the cost of drugs and treatments were among the factors that led to the higher insurance claims.
Meanwhile, responding to a question on the presence of foreign insurance companies in the domestic scene, some of which did not adhere to Malaysia’s ownership laws, Muhammad said the central bank had urged these insurance companies to fulfill their promises.
“That is what we are asking after giving the licence (to insurance companies) to operate in Malaysia … however the timeframe to fulfill the promises depends on the size of the company, smaller companies will deal with smaller problems and vice versa,” he said.
It was previously reported that foreign insurers in the domestic market have been instructed to find local partners and to involve local partners as stipulated in Malaysia’s ownership laws.
BNM had reportedly issued a directive in April to Tokio Marine Holdings Inc, AIA Group Ltd, Great Eastern Holdings Ltd and Prudential to submit the identity of the local partners, who will take over 30 per cent shareholdings in their operations.
Following the liberalisation of foreign ownership, Malaysia requires foreign insurance companies and takaful operators to comply with 30 per cent local participation in their companies and keep 49 per cent to 70 per cent foreign equity in their company.
On another development, broader risk factors, namely vehicle model, driver’s experience, driving behaviour and vehicle’s security features are now taken into account to determine motor insurance premiums as compared to factors such as the insured’s age, vehicle age and past claims records.
In 2016, 19,307 vehicles were stolen and insurers paid RM77.8 million in theft claims for the top three vehicle models namely Toyota Vellfire, Mitsubishi Pajero and Toyota Hilux. – Bernama