Medical inflation challenges L&H insurers and takaful operators

Life and health (L&H) insurers and takaful operators in Malaysia have been grappling with mounting challenges driven by steep medical inflation, regulatory shifts, and broader economic changes, according to Zurich Takaful Malaysia CEO Nur Fatihah Mustafa and Zurich Life Insurance Malaysia CEO Pauline Teoh.

For instance, medical inflation has contributed to a sharp rise in health insurance and takaful costs, making coverage less accessible to lower and middle-income groups. According to the Malaysianmnewspaper, The Star, medical inflation in Malaysia hit 15% in 2024, exceeding the APAC average of 10%.

The CEOs told Asia Insurance Review that as premiums/contributions rise, customers are growing more sensitive to pricing, which has affected take-up rates across both conventional and takaful segments.

This leads directly to the challenge of “striking the right balance between keeping protection affordable for customers while maintaining product viability from a business standpoint”.

Compounding the pricing pressures are new and evolving regulatory guidelines that “require greater agility in proposition strategies and portfolio management to remain compliant while meeting market needs”, they said.

Supportive regulations

Despite these challenges, both Ms Fatihah and Ms Teoh acknowledged that regulations in Malaysia are supportive of health insurance business. “The regulatory landscape, particularly the guidance provided by Bank Negara Malaysia (BNM), has been instrumental in enabling both the life insurance and takaful industries to innovate while maintaining the highest standards of customer protection.”

For instance, they highlighted recent regulatory changes, such as the launch of the Hijrah27 Framework (a strategic push to expand takaful's reach within Malaysia) and the Policy Document on Licensing and Regulatory Framework for Digital Insurers and Takaful Operators in 2024.

These changes have allowed insurers to design solutions that are more comprehensive, inclusive and compliant, particularly for underserved communities, while extending the reach of their insurance services.

Moreover, the regulations encourage the adoption of “a more customer-centric approach, driving the development of products that address the diverse needs of Malaysians, from long-term protection and savings to digital-first solutions”.

This is in addition to BNM ensuring that insurers uphold transparency and trust and cyber security as technology is integrated into insurers’ offerings, they said.

“The framework strikes the right balance by enabling responsible growth,” the CEOs said, noting that it empowers insurers to innovate without compromising on protection standards and allows them to create sustainable, meaningful solutions that protect and respond to Malaysians’ evolving needs with both empathy and efficiency.