Elderly Care Insurance Not Commercially Viable In Malaysia

Life Insurance Association of Malaysia says elderly care insurance isn’t feasible for insurers due to high payouts, recommending that Malaysia adopt Singapore’s pre-retirement care insurance. Malaysia’s healthy ageing prevalence is lower than Singapore.

KUALA LUMPUR, August 24 — Elderly care insurance is not feasible in Malaysia as long-term care is too expensive for insurers, said the Life Insurance Association of Malaysia (LIAM).

LIAM chief executive officer Mark O’Dell noted that life insurance gets cheaper as people live longer, but insurance for long-term care becomes more costly as Malaysians are often sick in old age.

“It’s in the financial sector blueprint for Bank Negara to look at long-term care to look at annuities, which is another area for retirees, but I will tell you long-term care is a very tricky business because the demographics work against you,” O’Dell told a forum on rising health care costs organised by the Federation of Malaysian Business Associations (FMBA) and Eximius Medical Administration Solutions (e-MAS) here last July 26.

“What’s happened in the last 20, 30, 40 years – people are living longer, but in the last few years of their life, they’re sicker. So, in their last two or three years, they’re quite ill.

“What happens is, contrary to life insurance [where] people live longer their premiums can be less, but with long-term care, people are living longer and having their last years being quite ill; the insurance becomes quite expensive.

“I recall the experience in the US, where most companies stopped even doing business because they were losing so much money. It just consolidated to just a few large insurers who had the volume to do it.”

O’Dell held that while there are methods to defray the cost, it is unlikely that anything comprehensive that will enable insurers to cover the full cost of nursing homes and elder care will emerge in the near future.

Be that as it may, O’Dell held that Malaysia could draw inspiration from Singapore’s pre-retirement opt-out care insurance to aid its citizens’ plan for golden years.

“They had an opt-out scheme. When you reached age 40, you were automatically enrolled in a long-term care plan, unless you opted out. And now, they’ve even lowered it to 30. So, the idea there is to build up the reserves over the years. Because if you look to be 55 or 60 and want to purchase long-term care, it can be very, very expensive.”

Singapore’s CareShield Life is a long-term care insurance that provides basic financial support should Singaporeans become severely disabled, especially during old age, and need personal and medical care for a prolonged duration. Singaporeans will be automatically covered under CareShield from October 1, 2020 or when they turn 30, whichever comes later.

Dr Suzana Shahar, head of the Centre of Healthy Aging and Wellness at Universiti Kebangsaan Malaysia, previously said that the number of Malaysians who experienced “successful” or healthy ageing declined from 13 per cent to 11 per cent in 2015.

Malaysia’s prevalence of healthy ageing at 11 per cent was lower than Singapore (17.8 per cent) and Thailand (27.5 per cent), but was about the same as the United States (10.9 per cent) and slightly higher than Europe (8.5 per cent).

The Malaysian government plans to table the Senior Citizens Bill in Parliament next year — the country’s answer to elderly care.

However, the government appears to push responsibility for elderly care to families, instead of proposing the provision of social care in the public sector or subsidising care in private facilities.

According to Women, Family and Community Development Deputy Minister Aiman Athirah Sabu, the bill may contain provisions that penalise adult children for sending their elderly parents to care facilities.

O’Dell said that the financial planning and management of health care for an ageing society requires a whole-of-government approach, beyond just looking at the central bank.

“The issue about medical insurance for seniors is a big one. And when you look at the incident rates, you can see why it’s not commercially viable for insurers to underwrite or to maintain coverage for a 75-year-old, 80-year-old, 85-year-old.

“The average incident rate – meaning the percentage of the insured that go to the hospital in any one year – across the whole board is about 10 to 12 per cent.

“But when you get to be 75, 85, or older, it starts to hit 50 per cent. So when you get to those kinds of numbers, it’s just not viable. When you look at other societies, I think, personally, this should be a big feature of the White Paper. Because when you look at other countries, it is not a Bank Negara issue, it is a government issue.

“This has to be a government-solved issue because there is no commercial entity that can put in a proposition that makes a lot of sense. I personally hope that it’s addressed in the White Paper.”

When it comes to aged or social care, the Health White Paper recently passed by Parliament does not offer a concrete solution. Instead, the document – which is meant to propose health care reforms over 15 years – states in general terms that a strategic review of the health system’s preparedness to address the future needs of an ageing population will be undertaken.

The demand forecast for services, facilities, human resources, technology, and funding will be included in the scope, as well as options for the expansion of benefit packages and contribution schemes to encompass long-term care.

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