News

Bank Negara Malaysia Revises Guidelines on Medical and Health Insurance Business 
Posted on Friday, August 26, 2005 - 01:00 AM

Bank Negara Malaysia issued today the revised Guidelines on Medical and Health Insurance Business to insurers which will replace the existing guidelines governing the medical and health insurance (MHI) business which was first issued in December 1998. The revised guidelines aims to promote more equitable and consistent treatment of consumers covered under MHI policies issued by both general and life insurance companies.

Faced with rising healthcare costs, consumer demand for MHI protection has increased significantly in the last five years. Annual premiums written by the industry in MHI business breached RM1 billion in 2003 and continues on an upward trend.

The revised guidelines stipulate the minimum standards that must be observed by insurers in relation to the terms of issue of MHI policies, the setting of premiums, limitations that can be imposed on core benefits provided under the policies, and disclosures to policyholders. The improved benefits to consumers generally include:-

• reduced waiting periods before a policyholder is entitled to claim for benefits provided under the policy;


• the introduction of a minimum 15 day 'free-look' period for consumers to assess the suitability of new policy purchased;


• adoption of more consistent definitions for important policy terms and conditions which will promote comparability between products and reduce ambiguity regarding coverage provided;


• limitations on the share of medical claims that should be borne by policyholders under co-payment terms for commonly purchased MHI policies; and


• clear and plain disclosures on key policy features at the point of sale.

The revised guidelines will also provide added protection for higher risk individuals by requiring insurers to appropriately moderate, based on the portfolio experience, any premium increases or surcharges imposed on such individuals. Under existing guidelines, an insurer also should not refuse to renew an MHI policy solely on the grounds of a previous claim made by the policyholder. Other underwriting factors - such as a change in occupation affecting the health risk of the individual or failure of the policyholder to disclose material information to the insurer - may, however, be taken into account in an insurer's decision not to renew a policy.

Insurers have until the end of 2005 to revise their existing MHI products in line with the requirements of the revised guidelines which will come into effect on 1 January 2006. In the meantime, new MHI products introduced before 1 January 2006 must also observe the requirements of the guidelines.

Consumers are advised to ensure that they provide complete information to their insurer as requested in the proposal form when purchasing an MHI policy, and make enquiries of their agent or insurer to fully understand any exclusions or limitations imposed on benefits provided under their MHI policy before confirming their purchase.

Bank Negara Malaysia
26 August 2005