In an article in The Edge Malaysia, dated December 2, 2025, titled “The Steep Rise Of Medical Insurance Premium Is Not Justifiable — Time To Protect The Middle-Class Malaysians”, a clearly pro-consumer stance is adopted, questioning whether insurers have adequately justified premium hikes reportedly ranging from 40 to 70 per cent.
Consumer advocacy plays an important role in highlighting affordability pressures, particularly for middle-income households. At the same time, long-term insurance contracts demand analytical clarity.
This article uses The Edge piece as context, agreeing where its arguments are well-founded, questioning where they require tighter discipline, and proposing a neutral framework for assessing when premium increases are genuinely justifiable.
The objective is neither to defend insurers nor to dismiss policyholder concerns, but to separate assertions from evidence.
Public Outcry And Regulatory Intervention
The Edge article correctly notes the scale of public backlash and highlights regulatory intervention that resulted in premium increases being phased over several years.
Factually, this intervention addressed timing, not quantum. The total increase remains intact; it is merely deferred.
From a policyholder’s perspective, lifetime affordability is unchanged. From an insurer’s perspective, underlying pricing assumptions are preserved.
This distinction matters. Deferral mitigates short-term cash-flow strain but does not, in itself, validate the fairness or necessity of the increase.
Regulatory responsiveness should therefore not be overstated as regulatory resolution.
Stand-Alone Product Economics
The article questions insurers’ insistence that medical insurance be assessed on a stand-alone basis, particularly when policies are often sold in conjunction with other products.
From a regulatory and business standpoint, the principle that each product line stands on its own is sound.
Pricing, reserving, and solvency assessments are necessarily product-specific. In any industry, sustained losses in a product line lead to repricing, redesign, or withdrawal.
Where the critique gains traction is not in disputing stand-alone assessment, but in challenging selective isolation, where losses are highlighted while other economically relevant elements are excluded.
Medical Insurance As A Loss Leader
An important dimension, often left implicit, is the historical role of medical insurance as a loss leader.
Across many industries, the main product does not generate the bulk of profits.
Printers are sold cheaply, while ink cartridges generate margins. Gaming consoles are aggressively priced, while games and subscriptions deliver returns. Razor handles are inexpensive, while blades provide recurring income.
In such models, profitability resides not in the individual product, but in the customer relationship over time.
Medical insurance has often functioned similarly:
- It addresses an immediate and emotionally salient need.
- It facilitates long-term customer engagement.
- It opens the door to the sale of other insurance products.
Recognising this does not imply wrongdoing. It reflects a common commercial strategy. However, it does carry implications: losses that arise from deliberately aggressive pricing cannot later be characterised purely as unforeseeable shocks.
This context matters when assessing how much repricing risk should reasonably be borne by policyholders.
Historical Underwriting Losses
The Edge article notes that medical claims have historically exceeded premiums, implying that insurers knowingly tolerated losses.
This is broadly accurate. Medical insurance is traditionally structured with low early claims and rising later-year costs. Underwriting losses in isolation are not unusual.
What matters is whether overall product economics, over the policy lifecycle, remain viable.
However, the existence of historical losses does not, by itself, preclude repricing if claim trends deviate materially from assumptions.
The argument is therefore suggestive, but not conclusive.
Investment Income And Product Economics
One of the stronger points in The Edge article is its emphasis on investment income.
Premiums do not sit idle. They generate investment returns, which are not incidental but integral to long-term insurance economics.
Excluding investment income when assessing product viability, while including it when assessing solvency strength, creates analytical inconsistency.
At the same time, investment income is volatile and cannot be assumed to permanently offset underwriting shortfalls.
The appropriate approach is neither to ignore it nor to over-rely on it, but to incorporate it into a holistic assessment of sustainability.
Predictability, Ageing, And Medical Inflation
The article argues that rising claims with age are predictable and should have been priced in.
This is actuarially sound. Age-related claim escalation is well understood and heavily modelled.
But with regard to the argument that premium increases are justified purely on ageing, the argument is weak.
Where nuance is required is in distinguishing between:
- Expected ageing effects.
- Unexpected acceleration in medical inflation, utilisation, or treatment intensity.
- The legitimacy of repricing depends on the degree and permanence of these deviations.
Covid-19 As A Justification
Scepticism toward Covid-19 as a blanket justification is warranted.
Insurance pricing is based on long-term expected experience. Temporary shocks — such as deferred treatments or one-off severity spikes — cannot justify permanent repricing unless insurers demonstrate that the underlying risk distribution has structurally changed.
Absent clear evidence of permanence, Covid-19 explains volatility, not inevitability.
A Neutral Test of Justification
Using The Edge article as context, the debate ultimately turns on a simple question: when is a premium increase genuinely justifiable?
A neutral assessment requires insurers to satisfy all of the following tests:
- Predictability Test: Were the cost drivers foreseeable at the time of pricing?
- Permanence Test: Are the drivers structural and enduring, rather than temporary?
- Holistic Economics Test: Does the analysis include investment income generated by premiums?
- Risk Allocation Test: Who bears the consequences of pricing error: the designer of the product or the locked-in policyholder?
- Incentive Test: Does full cost pass-through encourage pricing discipline or reward optimism? Failure on any one test weakens the justification for steep increases.
Conclusion
The Edge article performed a valuable service by surfacing consumer concerns. Its strongest contribution lies not in advocacy, but in prompting deeper scrutiny of how premium increases are justified.
Premium increases may sometimes be necessary. But necessity must be demonstrated, not declared.
Deferral alone is not protection; isolation without completeness is not analysis; and temporary shocks are not permanent truths.
Long-term confidence in insurance depends on transparency, consistency, and fair risk allocation. And all three factors raise one important question: do the premium hikes pass a clear and neutral test of justification?
Based on the available evidence and applying a clear, neutral test of justification, the answer is no.
This conclusion does not rest on consumer hardship alone, nor on a rejection of legitimate cost pressures. It follows from the fact that several critical tests remain unmet.
Firstly, the predictability test is not satisfied. Key drivers cited in support of premium increases — ageing, rising utilisation, and long-term medical inflation — were neither unknown nor unforeseeable.
These factors sit at the core of medical insurance pricing and should already have been embedded in premium structures. With regard to the argument that repricing relies on these drivers, it reflects pricing misjudgement rather than external shock.
Secondly, the permanence test remains unproven. While recent claims experience has been volatile, particularly around the Covid-19 period, insurers have not demonstrated that this Covid-19 volatility represents a permanent shift in underlying risk rather than a temporary deviation. Permanent repricing requires evidence of structural change, not episodic stress.
Thirdly, the holistic economics test has not been convincingly met. Premium hikes have been justified primarily by isolating medical underwriting losses, while the investment income generated by the same premiums is largely excluded from the discussion.
This selective framing obscures the true economics of long-term insurance products and weakens the credibility of the justification.
Fourthly, the risk allocation test fails on fairness grounds. The repricing framework places the bulk of adjustment costs on policyholders who are least able to respond; older insureds deep into long-term contracts.
Insurers, who designed, priced, and marketed these products and who benefited from their role as loss leaders and relationship anchors, bear little of the downside when assumptions prove optimistic.
Finally, the incentive test raises structural concerns. Allowing full cost pass-through after the fact reduces the discipline on initial pricing and encourages overly optimistic assumptions.
In any other industry, mispricing carries commercial consequences. In insurance, unchecked repricing risks becoming a substitute for accountability.
Taken together, these shortcomings do not suggest that premium increases are never necessary. They suggest that the case for steep and abrupt increases has not been sufficiently demonstrated.
Deferral may ease short-term pressure, but it does not answer the underlying question of justification. Until insurers can show that cost drivers are unforeseeable, permanent, and assessed holistically, and that risk is allocated in a balanced manner, premium hikes remain an assertion, not a conclusion.
In matters affecting long-term financial security, assertion is not enough.
The author has over 30 years of experience in life insurance underwriting and claims.
- This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.
