
Insurance Sector Poised For Healthy Gain Despite Inflation Worries
The optimism comes even as the government once again postponed the mandatory rollout of the diagnosis-related groups (DRG) payment system for private hospitals, pushing the implementation from mid-2025 to 2027.
The DRG framework, widely used in countries such as Thailand and Indonesia, aims to standardise hospital reimbursement based on diagnosis and treatment rather than charging per service. An interim version will begin in selected private hospitals this year, alongside a basic Medical and Health Takaful Insurance platform scheduled for 2026.
Insurers have been taking firmer steps to address medical cost inflation, though MBSB noted that increased healthcare spending remains unavoidable. Malaysia's healthcare tourism industry is under competitive pressure from regional players such as Thailand and Singapore, with private hospitals investing heavily in high-end facilities to attract overseas patients.
The Association of Private Hospitals Malaysia (APHM) has pushed back against several insurer proposals, including freezing private hospital costs for three years and regulating pharmaceutical prices, arguing these could compromise care standards and limit access to new treatments.
Rising claims have also been attributed by APHM to more severe patient cases, potentially linked to post-pandemic complications. Preventive care remains a weak spot, with just 6–7% of the Health Ministry's budget allocated to prevention, far below the treatment allocation.
Still, MBSB highlighted recent progress. The Price Control and Anti-Profiteering Order 2025 will require private sector medicine price displays by 2026, promoting transparency and competition. The cost of active pharmaceutical ingredients has also retreated to pre-pandemic levels, easing some pressure on drug prices.
Furthermore, co-pay uptake is gaining traction, with Allianz reporting encouraging adoption rates and insurers seeing lower health loss ratios in early 2025.
MBSB Research emphasised that while healthcare inflation is unlikely to disappear, continued insurer initiatives, combined with a low sector price point and the potential for higher investment income, provide a case for a positive re-rating.
The firm noted that companies under its coverage are market leaders, better positioned to navigate economic uncertainty and the structural challenges of rising reinsurance costs.
However, risks remain, including the possibility of slower premium growth if the economy weakens and the threat of persistent healthcare inflation even after the DRG rollout.
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