KUALA LUMPUR, Dec 22 — Insurers and takaful operators (ITOs) cannot unreasonably delay medical insurance claims or apply exclusions or conditions that are not stated in policy documents, says Bank Negara Malaysia (BNM).
The central bank was responding to CodeBlue’s report last December 3 on a Stage 4 tongue cancer patient whose insurer, Allianz Life Insurance Malaysia Berhad, deferred all his cancer claims pending an “investigation” into an unrelated hypertension episode in 2024 that he did not claim for at the time, and subsequently asked him to provide medical records dating back to 2017.
“ITOs must observe fair and prompt settlement of claims and cannot unreasonably delay or deny claims without valid justification,” BNM said in a written response to CodeBlue on Friday.
“In addition, ITOs cannot enforce conditions or exclusions that are not made known to the policyholder in the policy terms and conditions and related disclosure material.
“Where such cases arise, BNM can take actions to investigate and enforce its requirements.”
BNM’s statement appears to draw a regulatory red line against the application of unstated exclusions or waiting periods. In the cancer patient’s case, his policy contract specified only a 30-day general waiting period and a 120-day specified-illness waiting period.
While reiterating that insurers cannot unreasonably delay claims, the central bank stopped short of committing to mandatory timelines for claims processing or guarantee letter approvals.
CodeBlue had asked whether such timelines were needed to prevent insurers from deferring decisions indefinitely through repeated requests for additional documents, as alleged in the Allianz cancer case.
BNM did not define what constitutes “prompt” settlement, nor did it clarify whether prolonged deferrals, where insurers neither approve nor deny a claim, would amount to “unreasonable delay” under its regulatory framework.
While BNM said it can investigate and enforce its requirements where such cases arise, this places the onus on consumers to escalate disputes. In practice, many policyholders are seriously ill, may not know how to navigate escalation channels, or remain stuck in a “pending” limbo without a formal rejection to contest.
Specialist doctors have previously told CodeBlue that insurers’ failure to issue clear decisions – neither approving nor rejecting claims – can prevent patients from proceeding with treatment, while also blocking access to regulatory or ombudsman redress because there is no final decision to dispute.
No Requirement For Medical Screening Before Policy Issuance
BNM also said ITOs are not required to conduct medical screenings before issuing health insurance policies, and that the decision on whether to require medical check-ups rests with insurers’ own underwriting rules.
“ITOs decide whether a medical check-up is needed before issuing a policy based on their own underwriting rules,” BNM said.
“Nevertheless, all ITOs have a duty to ensure proposal forms ask clear, specific and relevant questions for the purpose of underwriting so that consumers understand their disclosure obligations.”
Consumers, in turn, are expected to provide accurate and complete information when responding to those questions.
“Consumers have a pre-contractual duty of disclosure, which means they should provide truthful, accurate and complete information when responding to questions from ITOs at the point of underwriting,” BNM said.
According to the central bank, disclosures made at the underwriting stage allow insurers to “accurately” assess individual health risks, determine appropriate policy terms and conditions, and set premiums that reflect the insured person’s “true risk” profile.
“This process ultimately protects the sustainability of the risk pool for all policyholders and ensures that all policyholders receive coverage that is both fair and equitable,” BNM said.
However, the central bank did not outline any additional safeguards to address situations where insurers choose not to conduct medical screening upfront, but later undertake extensive retrospective reviews of medical history once claims are made – sometimes years after policies were issued and premiums collected.
This regulatory framework mirrors long-standing industry practice, in which insurers may opt for simplified underwriting or minimal upfront checks to reduce barriers to entry and expand the risk pool, relying instead on proposal forms and disclosure obligations. Some ITOs even promote their health insurance products with “no medical check-up required”.
The consequence is that disputes over disclosure are often triggered only at the point of claim, when policyholders are already ill.
This issue is particularly significant in Malaysia, where chronic disease is widespread and often underdiagnosed.
Many people are unaware they are living with conditions such as diabetes, hypertension, or high cholesterol until they are screened or present late with complications.
The National Health and Morbidity Survey (NHMS) 2023 found that more than two million adults are living with three non-communicable diseases among diabetes, hypertension, high cholesterol, or obesity. More than half a million adults, about 2.5 per cent of the population, are living with all four conditions, which substantially increase the risk of heart disease and stroke.
BNM Points Consumers To FMOS, BNMLINK For Claims Disputes
On avenues for redress, BNM said consumers who remain dissatisfied after an insurer’s initial resolution process may escalate their complaint to the Financial Markets Ombudsman Service (FMOS), which handles disputes within its jurisdiction.
“In certain circumstances, FMOS may also review cases outside its jurisdiction if both the consumer and the institution agree to refer the matter,” BNM said. For complaints that fall outside FMOS’s scope, BNM said consumers may seek assistance from BNMLINK.
However, BNM did not explicitly clarify whether cases involving indefinite claim deferrals – where insurers do not issue a formal decision – qualify for escalation to FMOS, an issue CodeBlue raised in relation to the Allianz cancer case.
In practice, insurers may delay resolution by issuing repeated requests for additional documents or information without making a formal decision. Patients can therefore remain in a prolonged “pending” state, unable to proceed with treatment while also unable to escalate the matter formally, because there is no final decision to dispute.
BNM also pointed to the Grievance Mechanism Committee (GMC) as part of efforts to improve medical claims management.
However, the GMC is made up of largely industry stakeholders, including the Life Insurance Association of Malaysia (LIAM), General Insurance Association of Malaysia (PIAM), and Malaysian Takaful Association (MTA) – the same industry bodies representing ITOs that doctors and patients have raised complaints against in relation to claim delays, denials, and retrospective investigations.
The Malaysian Medical Association (MMA) and the Association of Private Hospitals of Malaysia (APHM) are also represented on the GMC.
BNM did not mention any representation from patient or consumer groups on the committee that also has representatives from private hospitals and doctor groups.
According to BNM, the GMC is “working to improve communications between hospitals, doctors and ITOs in medical claims management”, including establishing “clear claims protocols to address common claims pain points and ensure more consistent practices across payers and providers”.
“This will be adopted for all MHIT (medical and health insurance/takaful) claims and will serve to provide more transparency and certainty in the claims process to all parties going forward,” BNM said.
BNM did not provide a timeline for when these protocols would be implemented or clarify whether they would be legally binding on insurers.
