What steps is Bank Negara Malaysia taking to combat rising insurance premiums?

For many Malaysians, private healthcare functions as a vital bridge between a heavily subscribed public hospital system and the increasingly complex care people expect when something goes wrong. That bridge grew more expensive in 2024. Bank Negara Malaysia reported that medical cost inflation hit 15 percent, outpacing the near 10 percent global trend and the roughly 10 to 12 percent range seen across Asia Pacific. The comparison matters because it confirms that Malaysia’s experience is not only part of a worldwide surge in medical costs but also above regional peers, which intensifies the squeeze on household budgets and employer plans.

The price shock did not come out of nowhere. Through the second half of 2024, household anxiety climbed as news outlets reported looming insurance repricing that in some cases ranged from 40 to 70 percent for 2025. These reports reflected notices already reaching policyholders and sparked questions about affordability, fairness, and oversight. The central bank responded initially with transparency and conduct measures, then with formal interim relief. By July 2024, insurers and takaful operators were told to publish clear justifications for premium changes on their websites and to notify customers well in advance. From September, firms also had to offer a variant of medical and health insurance or takaful with co-payment features so consumers could choose lower premiums in exchange for sharing more of the bill.

In December 2024, Bank Negara moved again, announcing interim measures that remain in force through the end of 2026. The relief requires premium or contribution increases to be staggered over at least three years and sets an expectation that at least four in five affected policyholders will see yearly adjustments of no more than 10 percent. The package also includes targeted support such as a temporary pause in adjustments due to medical claims inflation for older policyholders at minimum cover levels, alongside reinstatement options for policies lapsed or surrendered due to repricing. These steps do not eliminate repricing but spread it out, cap most increases, and give families more time to adapt.

Why did inflation in medical costs accelerate so sharply in the first place. Bank Negara and the Health Ministry point to a familiar but powerful set of drivers. Non-communicable diseases such as diabetes and heart disease have become more prevalent, the population is ageing, the cost of skilled manpower has risen, and treatment has become more advanced as technology and pharmaceuticals improve outcomes at higher prices. A lack of consistent price transparency and the tendency of fee-for-service billing to reward volume rather than value further amplify cost growth. Together these factors push claims higher for insurers, which then flows through to premiums.

The macro numbers reflect how heavily households now rely on private protection. Malaysia’s total health spending reached roughly RM84 billion in 2023 according to the Health Ministry’s National Health Accounts, while Bank Negara notes that contributions to medical and health insurance or takaful have multiplied roughly sixfold over two decades, from under RM1 billion in 2003 to well over RM6 billion in 2023. That is a profound shift in how families finance care and a reminder that pricing pressures reverberate across the economy and the public system as people re-evaluate whether they can keep their cover.

The frustration for many policyholders is sharpened by the optics of strong industry profits. Allianz Malaysia’s net profit for 2023 rose to about RM730.9 million, while Prudential Assurance Malaysia’s 2023 net profit reached roughly RM963.5 million, a year-on-year jump of about 68 percent according to financial statements and business press reports. None of this proves profiteering, since profitability is influenced by investment returns, business mix, and regulation. It does however explain why consumers question whether premium increases are fairly calibrated and whether more can be done to rein in the underlying drivers of claims.

The private hospital side of the ledger also shows robust growth. KPJ Healthcare, one of the country’s major hospital operators, reported a milestone quarter in late 2024 with revenue above RM1 billion, supported by higher admissions and bed occupancy. Sector advocates argue that private hospitals shoulder heavy fixed costs for buildings, imported consumables, and sophisticated equipment, all in a tight labour market. Those realities do not make rising bills easier for patients, but they explain why cost control must target the way services are purchased and priced rather than simply squeezing one link in the chain.

This is where Bank Negara’s broader reform agenda comes into focus. The central bank’s Annual Report 2024 set out five strategic thrusts and nine initiatives developed with the Health Ministry, Finance Ministry, industry bodies, hospitals, and consumer groups. The thrusts are intended to pull costs toward a more sustainable path while preserving access to essential protection. The first thrust zeroes in on price transparency. The goal is to publish price ranges for common procedures and to display retail drug prices so that policyholders and insurers can make informed choices and so providers face competitive pressure. A formal method for tracking and publishing medical inflation will be aligned more closely with how general inflation is measured, creating a shared starting point for debate and negotiation.

The second thrust tackles the provider payment model by preparing a shift away from fee-for-service toward diagnosis related groups. Under a DRG approach, hospitals receive a predetermined payment for a defined episode of care that reflects diagnosis and severity, with co-morbidities and complications factored in. The incentive moves from doing more to doing what works, encouraging efficiency and predictable spending. Policymakers have signalled that DRG adoption will be phased and anchored in evidence, and reporting indicates the early stages focus on public facilities with future phases tailored for private settings. The direction is clear even as the pace is pragmatic.

The third thrust aims to reshape medical and health insurance and takaful itself. The plan is to design a base product that scales risk pooling, keeps benefits cost-effective, and reduces the need for sharp repricing. This sits alongside strategic purchasing of care, where insurers contract for services in ways that reward value rather than volume. The base product is not intended to be bare bones. It is intended to be sustainable, portable, and transparent, with optional enhancements riding on top for those who want additional comfort. As reforms bed in, Bank Negara has signalled that pilots and phased rollouts are expected so that consumers see improvements without disruptive shocks.

The fourth thrust widens cost-effective options for patients. That includes expanding mid-tier beds through public-private initiatives and supporting not-for-profit hospitals as an affordable choice. These options create a reference price for comparable services and can cool the escalation at the very top end by giving families real alternatives within the private system. The intention is not to cap quality but to build a middle lane where clinically appropriate care is delivered at prices that do not break the bank.

The fifth thrust is digital health and data portability. Better interoperability of electronic medical records across hospitals reduces duplication, prevents avoidable complications, and cuts unnecessary imaging and testing by making a patient’s history available at the point of care. Anyone who has ever repeated a scan because records could not be shared understands the waste involved. Over time, integrated data also enables smarter purchasing and clinical audits, both of which bend the cost curve while improving outcomes.

What does all of this mean for households deciding whether to keep, change, or drop cover. In the near term, the interim measures provide a buffer. If your plan is being repriced between 2024 and 2026, the increase must be spread over at least three years, and the vast majority of policyholders should see yearly changes capped near 10 percent. Some seniors at minimum coverage levels qualify for a temporary pause in adjustments tied to medical claims inflation, and there are reinstatement pathways for policies surrendered during the repricing wave. Insurers have publicly affirmed support for these rules and have been notifying customers in stages. If your notice appears to exceed these guardrails, you can escalate the matter with your insurer and, if needed, raise it with the central bank.

The longer term is about how the system pays for care. If price transparency becomes routine, if DRG models are rolled out thoughtfully where they fit, if a solid base product reduces churn and repricing, and if digital records stop the waste of repeated tests, then premium growth should moderate from the peaks seen in recent years. None of these levers is magic. Together they create more predictable conditions for providers and payers, which makes protection more predictable for families. That is the point of policy here.

There are practical steps you can take while the reforms progress. First, read any repricing letter closely and look for the insurer’s published reasons for adjustments, which should now be listed on its website. If you are comparing options, consider the co-payment variant that suits your budget and risk tolerance. A modest co-pay often lowers the annual premium meaningfully and can be sensible for those with savings to handle occasional bills, while a lower co-pay plan may still be worth the premium if you have chronic conditions or prefer higher predictability. Next, check your panel and network rules since using a panel facility can reduce out-of-pocket gaps. Finally, review overlaps across employer and personal cover so that you are not paying for benefits twice. These are not one-size-fits-all decisions, but in a high inflation environment the discipline of an annual review is no longer optional.

One more reality deserves attention. When premiums jump sharply, some people surrender cover and head back to public hospitals, which are already under pressure. That is neither good for families nor sustainable for the system. The current package of reforms is best understood as a bridge to a better equilibrium where private cover and private provision remain viable and where public facilities are reserved for those who need them most. The same logic applies to hospital operators and insurers. Lower, steadier medical inflation is in everyone’s interest because it keeps customers in the system and builds trust that protection will be there when it counts.

Malaysia’s medical inflation problem is serious but not intractable. The central bank has framed a coherent set of levers that reinforce one another. Transparency pulls hidden costs into the open. Payment reform rewards outcomes instead of activity. A redesigned base product keeps risk pools broad and premiums steadier. Cost-effective hospital options create competition where it matters. Digital health ties it all together. Progress will depend on execution, open data, and the willingness of all parties to prioritise value over volume. If the pieces move in tandem, the next time we look at Malaysia medical inflation it will be trending closer to the region rather than leading it, and families will feel that their cover buys not just peace of mind, but real value.

Sources used in this article include Bank Negara Malaysia’s Annual Report 2024 chapter on medical and health insurance and takaful, the central bank’s December 20, 2024 interim measures, Health Ministry expenditure data, press coverage of premium hikes reported in November 2024, and industry financial disclosures, among others. For reference on specific data points see the citations above.